Let's talk about relationships - business relationships, to be specific. As your business grows, you will inevitably need to bring in additional help, whether in the form of employees or contractors. Although it can be somewhat of a gray area, it's crucial to accurately categorize the individuals who work for you.
While hiring contractors may offer more tax advantages, there has been a rise in the overuse of this classification, which has prompted the IRS to take a closer look. It may seem trivial, but the IRS wants to ensure that you are correctly classifying your workforce, and paying the appropriate taxes too! That's why it's essential to ensure that you are classifying your employees and contractors correctly, and documenting the reasoning behind your decisions.
What you'll hear in this episode:
[1:15] The difference between an employee and a contractor
[3:15] Considering how the relationship looks to the IRS, with examples; do you truly have a contractor or are they an employee?
[7:30] The different levels of control: relationship, financial, and behavioral
[12:15] Examples from my business
[15:30] What happens if you misclassify an employee or contractor and how you make it right
* Related episodes:
237. Tax Tips for Short Term Rental Owners with Ryan Bakke
238. Why Your Tax Pro Says No to Creative Strategies
241. Five Key Financial Building Blocks for Your Business
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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.