August 24, 1998
QUESTION: I appetite to accessible a beard salon. I will accept assets by renting booths to hairstylists and attach technicians. Are they my advisers or absolute contractors?
What governs the classification?
If I accept employees, what are the filing requirements?
In chargeless whether an alone is an agent or an absolute architect beneath accepted law rules, the basal aphorism is that anyone who performs casework is an employee, if the employer can ascendancy what will be done and how it will be done.
This is accurate alike back advisers are accustomed abandon of action. What affairs is the acknowledged appropriate to ascendancy the adjustment and after-effects of services.
Facts that accommodate affirmation of the bulk of ascendancy and ability abatement into three categories:
Behavioral control: facts that appearance whether the business has a appropriate to absolute and ascendancy how the artisan does the task.
Financial control: facts that appearance whether the business has a appropriate to ascendancy the business aspects of the worker’s job.
Type of relationship: facts that appearance the parties’ blazon of relationship.
On the added hand, a artisan is an absolute architect if you, the payer, accept the appropriate to ascendancy or absolute alone the aftereffect of the assignment and not the agency or methods of accomplishing the result.
If you allocate an agent as absolute architect and you accept no reasonable base for accomplishing so, you may be captivated accountable for application taxes for that worker.
If you appetite the Internal Revenue Service to actuate whether a artisan is an employee, book Form SS-8, Determination of Agent Assignment Status for Purposes of Federal Application Taxes and Assets Tax Withholding.
You can get Form SS-8 by calling the IRS at (800) 829-3676.
Employers charge abstain assets tax on employees’ wages, and charge pay Social Security and Medicare taxes, as able-bodied as abstain the employees’ allocation of these taxes.
Employers are additionally amenable for federal unemployment tax, or FUTA.
Employers charge additionally accommodate advisers Form W-2 which shows the bulk of tax withheld.
Employers who abstain taxes charge book Form 941, Employer’s Quarterly Federal Tax Return. They may additionally be appropriate to book Form 940, Employer’s Annual Federal Unemployment Tax Return.
If your artisan (an individual, not corporations) can be classified as an absolute architect and if you paid $600 or added for the year, you charge book Form 1099-MISC.
The 1099s are due to absolute contractors by Jan. 31 and to the IRS by Feb. 28 in the afterward year.
The absolute contractors are amenable for self-employment tax.
As a payer, you can affirmation the costs beneath “commissions and fees.”
For added information, apprehend IRS advertisement 15 and 15-A. The The Small Business Development Center at the University of Central Florida sponsors chargeless Small Business Tax Workshops already a ages to advice new business owners apprentice about their tax rights and responsibilities.
Call the SBDC at (407) 823-5554 or the IRS Taxpayer Education Office at (904) 232-2514 for time and location.
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