Are Your Employees Correctly Classified For Taxes?
When tax time comes around, are you being reactive or proactive? Do you find yourself swimming in a sea of questions? Like, is it better to do my tax return cheaply? How do I know if I’m doing them the right way? Welcome to The Tax Answers Advisor with Marcelino Dodge. Today we’ll answer these questions and many more, sharpen your pencils and take some notes. Now here is your host, Marcelino Dodge.
Marcelino: Welcome today to The Tax Answers Advisor. This is the one and only and many are thankful for it, Marcelino Dodge on show number 24 and building. I am trying to help you to swim through the large ocean of taxes be at your individual taxes, or business taxes today though, because we’re going to be talking about employee or contractors on classifying your employees is going to be a little bit of a combination.
Because you could be some type of entity and have employees, or you could just be a Schedule C, sole proprietor and have employees as well. So there’s going to be a big combo today as we look at that. But it’s interesting, because there’s so much happening in the last week, with the signing of the American rescue plan that seems to be real big in the news and stimulus payments $1,400 going out some of the other provisions in it.
But what happens, at least what I think is happening with this is that a lot of other potential tax issues are getting ignored, because these others are so big, so up there and everything, because they’re just become top of mind. But that’s why I’m going to talk about employees and contractors, proper classification, because, at least in my mind, information such as this is just as important as all the other information that’s in the American rescue plan.
I’m just going to touch on a few key provisions, of course, some of the $1,400 payments per person have started arriving for some throughout the country via direct deposit. Now, also one of the big provisions, of course, which is a hassle for myself as a tax preparer, many others who have done tax returns with unemployment compensation because they, as a part of it have $10,200 exclusion per taxpayer of unemployment received now that’s once again, per tax payer.
So if there’s a married couple, and one of them has maybe more unemployment, one of them has less unemployment, there’s still only 10,200 per taxpayer. So that could end up meaning for myself and other tax preparers and nightmare, perhaps either having to amend or return or supersede a return. So just gonna kind of depend on what if it’s actual benefit for the client or not, which is why we stop and really take a close look at that.
Now, one other point they talk about, and this is just fact, as I relate facts in this program, is that there are tax provisions regarding the child tax credit, raising that to 3000 making it refundable or 3600, if your child’s age five and under. Now, the challenge this is one of the provisions with this is the fact that this provision really does not benefit until either later on in the year, or even until next year, so it’s not assistance right now, as of the date of this broadcast, or the date of the signing of the of the law. Now there are some advanced payments that they’re going to start in July, which is going to be reconciled. Next year, in the year 2022.
Now, these advanced payments are supposed to start in July, but who knows how well that’s actually going to work for taxpayers, it’s going to be interesting to see plus they also made it up to age 17 that the child tax credit can be received. There’s other benefits, that throughout this, we’re not going to get into too much of those discussion, because that’s it’s just too detailed can be very muddled. At least I think, to go through in a broadcast like this, especially it’s I got another focus I want to focus on here.
But there’s many benefits tax wise that once again, don’t really benefit until 2022. Now, they’d make some other provisions for employer reimbursed, dependent daycare that they can reimburse more than $5,000. Now how many employees are actually going to do that? Who knows? It seems odd to raise a benefit like that available when so many other so many businesses are struggling these times so and also the day dependent daycare credit that is available for parents that are having their children in daycare that was raised and also made refundable.
Now, once again with that maybe they’ll spend a little more this year on daycare, I don’t know what’s going to happen with it. But that is one of those benefits that really doesn’t benefit in 2021. And it’s just a fact. It really doesn’t benefit until a tax return is filed in 2022 for this year. So don’t let people mislead you in the fact that everything’s benefiting in 2021. It just doesn’t happen when you go and file a tax return or I prepare these tax returns next year, I’m going to ask what these things are, many of these are going to start occurring.
So just please keep that in mind, then the big announcement that just came out yesterday, is at tax day is now been extended to May 17th. So, for the second year in a row, we have the taxes just extended by the IRS for when they’re going to be due to be paid, and to be filed. So we’ll leave that as it is, and we’ll just move on and just get taxes done. Now, the main topic for today is of course talking about your employees that you have working for you in your business, are they actual employees?
Or are they independent contractors? Now another area that comes into the discussion, which I’ll do a little bit more detail later in this broadcast is another area that is a statutory employee, which since Tax Cuts and JOBS Act came out, there’s been a few more classified as statutory employees now. But why would some, perhaps take a risk to try to classify people working for them instead, as employees as independent contractors? Well, of course, some tried to do it because they want to, quote, save costs. And because they want to save costs, they think, well, we’re going to save a lot of money on the employment taxes, which is, of course, that’s the Medicare matching that employers do and the Social Security matching that employers do, which is 7.65%. So they that’s that actually is not a lot.
But they also have, of course, federal unemployment, which is actually not very much either the state unemployment may, or may not be that much depending on the state that you are in, and what your rate is, according to your industry. And then of course, the biggie is why some tried to do that is for workers compensation savings, which could actually be the biggest savings, perhaps I always put savings in quote on this, because the when you look at what happens with misclassification of an employee, it can be a very, very dangerous practice.
Now, I say that because I have had individuals who have had to pay back and see what happens is that if you classify someone as a independent contractor, and they are actually an employee, and the IRS gets wind of it, there can be enormous penalties, there can be not just the taxes because you have to pay not just the employment taxes, the matching and the withholding, you’d actually would have to pay both behind.
But you would also have penalties, you’d have interest, all that built up on this by the IRS for your failure to properly report your contractors who would be more class who would be more correctly classified as employees. So we want to avoid those penalties. Now, I really hit on this because I have had experience with this particular area and that. The IRS isn’t the one so much to be worried about when it comes to employee classification.
It’s actually whatever state you live on each state’s Department of Labor, in some cases have stricter rules when it comes to employee classification than the IRS does. So the IRS rules that I’m going to review today are like the starting point of proper employee classification. Because then you got to go back and look okay, how do these rules from the IRS compare with what my state Department of Labor says and as an employer, it’s good to keep that in mind and good to know those.
Because if you do get an audit from the state of 1099s, because it can very easily happen, where you can have a 1099 employee, well, contractor, a person that you gave a 1099 to. And they file a complaint with the State Department of Labor about the classification that can actually trigger an audit from the State Department of Labor, into your business to check on employee classification. And when they go through that, the state can actually reclassify and say you know for this year, all of these individuals to whom you give a 1099.
They should have received a W-2 and we’re going to reclassify them back to employees. And you end up paying the state unemployment penalties, and the state unemployment rates for those some cases, former employees. And that’s just the beginning of it when you miss classify. The second part of that is that once this date has reclassified them, then you need to go in and take care of it with the IRS and go out, fix 1099s that were issued wrongly, and then change them intoW-2s, then you got to go back and file the 941s.
For each quarter, get those all file and get all the taxes associated with them paid. And you got to do that right away. Because if you don’t do that, when your state classifies it, it’s one of those deals that can really come back and hurt you at a later date. Now, if you have done this in the past, and you want to avoid any problems with the IRS, because it’s interesting, because when the state comes in the Department of Labor comes in.
There penalties actually are not that bad. I’ve actually had a client this happened to they got audited, we went through and actually I agreed with the state in this case I didn’t I could not get the client to properly classify says, “Well, this is what could happen and exactly what I thought happened happen.” But the state penalties weren’t that bad. But were the penalties and come in is it.
The IRS comes in because if you have an employee or a contractor that you gave a 1099 to, and I’ve done, I’ve actually done this, who was you believe was misclassified. I have actually filed, there’s a form you can file when you file a tax return that says, “I believe I was misclassified by this person, they shouldn’t have given me a 1099, they should have given me a W-2.” Which basically, then what that does that that takes that employer who had issued at a 1099 on the IRS radar.
And once they’re on the IRS radar, the IRS can come in and say, “What’s happening here, we want to take a look at how you’re classifying your employees.” And then we want to examine and see if it meets up to our guidelines as to whether they are an employee, or are they an independent contractor. Now the employer is very smart, if they realize, you know, we got something wrong here, we need to go ahead and fix this.
Why it’s good is that there’s actually a program the IRS has, that allows you to basically get a free pass, if you come up and say, “You know, I’ve been doing this wrong, I’m going to fix it, I’m going to go forward.” And you just file and they give you a break on the taxes for that year on the employment taxes for actually for the year when you make the correction, which is simply marvelous. And you avoid penalties and interest that way as well. So if you come clean and just do it upfront, the IRS just will take care of you.
They’ll work with you. I actually had a once again, a client that I went through this program with we filled out everything that exactly everything according to IRS guidelines. And we’ve been doing it exactly ever since, we never heard from the IRS, we got Hey, you’re good to take care of this. And they took care of us. So I want to make sure and urge employers to make sure you classify correctly. Now we do. As I mentioned, some states do try to do things really strict.
I mean, the biggest one we know of is California trying to reclassify the Uber and Lyft drivers as employees. They tried to pass a law but the companies within the gotten injunction and the November election come up, but they managed to get it approved for ride sharing and delivery drivers are considered independent contractors by California law. So that’s where we see different Departments of Labor, try to go in and just make adjustments to whatever they think is right or correct. Now for Uber and Lyft drivers.
There’s different opinions on that. But it’s hard to really know, at least from my standpoint, as a tax preparer and looking at them in relation to the IRS guidelines, which is what I’m looking at here. To me, they would be independent contractors, and it would only be hurting them to classify them as employees, at least that’s my professional opinion based because I mean, I’ve used these services.
And it certainly seems reasonable that it’s more beneficial to them to be independent contractors with the flexibility and everything that they work with because some of them do. Some people do both companies. So they’re not even exclusively working for one company. So it’s quite an interesting deal. So my basic thing is, do not take the risk no matter what state you live in, do not take the risk make sure all of your employees are those who we have working for you are properly classified as either an employee or an independent contractor there.
What we’re going to do, we’re going to take a little break here. But when we come back we’re going to go into start taking a look at the exact criteria used by the IRS, this is used by the IRS not by State Department of Labor but by the IRS to determine whether individual is an employee or an independent contractor. So we’re gonna come back and take a closer look at that in just a couple minutes on The Tax Answers Advisor, with Marcelino Dodge on The Voice America Business Channel.
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Are you wanting to grow wealth faster, save time and build a nest egg? Hire a tax pro who makes you money and does more than just file your tax return? Marcelino Dodge of Cash Tracks Financial identifies your key numbers, works year-round, improve your numbers, keeps you compliant and helps you achieve goals faster. Call Marcelino Dodge today, 719-336-8739 to schedule your free tax strategy review. Call 336-8739 or visit cashtracksfinancial.com.
Many people want to build wealth or grow their business faster, but do not know what specific numbers to look at that actually helped build monthly cash flow. Hire a tax pro who makes you money and does more than just filing your tax return? Marcelino Dodge of Cash Tracks Financial identifies your key numbers, works year-round to improve your numbers, keeps you compliant and helps you achieve goals faster. Schedule your free tax strategy review by calling 719-336-8739 or visit cashtracksfinancial.com.
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This is The Tax Answers Advisor with host, Marcelino Dodge. To reach our program today, please call in the number is 1-866-472-5790. That’s 1-866-472-5790. You may also send an email to success@cashtracksfinancial.com. Now back to The Tax Answers Advisor.
Marcelino: Welcome back to The Tax Answers Advisor. This is Marcelino Dodge, I am so appreciative of you listening to today’s program, as we’re talking about properly classifying your employees, those individuals who work for you. Yes, you need to make sure as you’re conducting business, and most businesses really don’t have an issue with this, there are some who, for lack of a better way to put it, some people are just cheap, and think they’re doing themselves a favor by issuing people 1099s when they should be probably getting W-2s in the course of their work.
So that’s why we’re touching on this because it can be in the long run, it can be very costly, because the IRS can go back and say, “Oh, you know you did this wrong for years.” So guess what? You owe us X amount of taxes, penalties and interest for years. So as we come back and take a look at this, what we’re gonna do first of all is look at one of the areas that the IRS looks at is behavior in the course of conducting business. So, what is the employer doing?
One of the areas that is instructions given to the employee? Yes, that’s like giving what kind of direction do they give them to complete a certain task? Are they giving them specific instructions? Okay, you this is your assignment, this is what you’re going to do. This is where you’re going to go, all of these kind of areas and behavior is there a certain amount of behavior control with these instructions and with this is it’s very important because once again, how much control they have over the behavior. If there’s a certain amount of behavioral control, then yes, this person is an employee, not a contractor.
Another area is tools provided to the worker. Is the worker using tools or equipment that the employer provides? Now, one of my big challenges that I run into with this is the fact in tools I look at this, like, for example, in the trucking industry is that if an individual is driving a truck that is owned by the person, they’re working for the employer, so to speak, and the employer puts in the fuel, he maintains the truck, it could very well be likely that that person, he’s a truck driver.
But yet, because he’s using the tool, the equipment provided by the owner of the truck, he could very well actually be not an independent contractor, but the employer. Now the other part of that that falls in this too, which gets more into relationship is the fact is if that person is only driving the truck, and only doing runs for that particular owner of the truck, so that that’s just one example. The other example could be in, like in a shop of some sort, well, many times, many mechanics have their own tools.
But sometimes you’re in certain shops, or other areas where certain tools are provided for the individuals working there. Well, that those tools being provided by the employer, once again, more likely uses that person as an employee. Another area is it other individuals with whom you are working with. So you’re not the only one working there, you got several work in there in the area, or in the business with you.
And sometimes they help you do stuff, but you’re not paying them to help you. So you’re the one doing the work. But the other individual helping you is actually still getting paid by the employer there. When you have that kind of assistance, then, once again, you are probably an employee. And so as the employer, you probably need to recognize, yes, this person is an employee. Also, if the firm or employer wants to kind of touched on this a little bit already, other equipment and services for you.
And you’re providing these as a part for the individuals coming into your place of business and working for you. You’re providing them this equipment, you’re providing them these various services, then yes, this person is probably your employee, even though they’re driving to the extended location, if you have certain locations, or different locations where you’re working in the driving, but you still provide the equipment, you provide the services for them to be able to go out and do their business and do what they need to do.
They’re still probably an employee. Then the other part that fits into this behavioral portion, does the business provide training for the individual? This is perhaps one of the biggies because many businesses have certain ways that they do business, certain ways that certain services are provided. And though the business then comes in, they have a new person come in. And this person has no skills in what you’re doing. But you’re offering to train them to do the skill set.
For example, a person comes in, sometimes I start a new person in my office that needs to learn a little bit more about taxes. I provide them a certain amount of training on tax returns, I provide them some other basic training and of course, my computer software that I use, and so on. The fact that I provide them that training to help them to do the job is the fact that also helps to see that this person would be an employee.
Whereas by contrast, if a person behavioral wise, if I don’t provide them with tools, if I don’t provide other workers to assist, they provide all their own equipment, and they all come in trained for a certain task, that person could very well be a contractor just once again, looking at all these various criteria that we have. Then we come in and we take a look at another one which really can get really sticky with some people because this is where of course getting the money side of it the financial control because we’ve gone over behavioral control that a potential employer has over an employee.
But there’s also what’s known as financial control. So how much is a potential worker, investing in facility, investing in tools. And so if a worker coming into your business, has no investment in the facility has really no investment in tools, or other parts of the business, then that individual is probably your employee. And you want to avoid the 1099 issue. Now, some of the some of the cases financial control, you may provide them with, for example, a laptop computer as part of their business, what they’re working for you in the business.
But here’s where the kind of the tricky part gets in is that you provide them with a certain laptop and data side, well, this laptop is not quite up to my standards, I’m gonna go buy me a different one. Well, just because I go and buy a different one that they want to use. In the course of conducting your business, that could still be their laptop, but that doesn’t make them a contractor. Because basically, you still provided them with something, but they chose not to use it.
So in that financial control, then, again, they’d still be classified as an employee. Now the extent that the worker is available to others, as well. So is it, how often is this worker available? Are they following a certain schedule that a schedule that you made as the employer, or are they making their own schedule? See, of course, some of these, all of these can have variations. And some could be maybe, by individual by business may lean more to an independent contractor than an employee. But what’s the overall picture is basically what I’m gonna cut is what I’m getting at here with this is that some of these may lean toward contractor, some of them may lead to employee, but if more of a lean toward being an employee, then you better classify them as an employee. Also, when it comes to workers compensated for services.
Yes, who is setting basically the rate of pay for the individual? Are you as the employer coming in, say, “Okay, I’m going to pay you minimum wage, which might Colorado right now, $12.32 an hour, I’m going to pay you that much for your services.” And that’s, that’s what it’s going to be. So basically, if you as the employer are setting the rate of pay, this person is more likely your employee. Now, if the worker comes in, and says, is coming in saying, “Well, I’m going to work for $20 an hour.”
And this is what my services are going to be then. Then through negotiation, or whatever, that depending on compensation, as well as the fact if this worker works for others, and not just you. And this worker also actually invoices you for the services that they perform, then this worker could be an independent contractor. So just how’s that compensation work there? Who sets the pay schedule, as your other party if you come in, especially if you come in and say that we’re going to pay you every two weeks?
This is the pay schedule. then probably you have an employee on your hands, and then the worker that’s coming in and doing work, are they again, going to have this interesting in a financial matter part of this? Are they going to have a profit or a loss? See which this is where it’s really separates an independent contractor from an employee is at the worker do they have a financial risk base is basically in working for you.
Because one who has an independent contractor has some financial risk at least and could actually incur a loss or of course, they could make a profit. But one who was coming into your business working according to your schedule, your pay rate. And basically is not taking any risk, other than getting up in the morning and going to your place of business, but not taking really any financial risk, they are probably your employees.
And they’re not really conducting business, they’re not really making a profit or a loss. So these financial concerns all fall in this because one thing I do know, for some State Departments of Labor, and even with the IRS, it would be. Is this person really in business for themselves that you’re trying to give a 1099 to? Will they incur a profit or loss? Do they work for other people, as well? And sometimes even as simple as, do they have a business card that they share with others?
And I’ve kind of gone into some of these areas a little bit, because we’ve covered behavioral qualifications, we’ve covered the financial considerations. Now, there is also a relationship consideration in regards to employee classification. And this relationship area is related to once again, how close is the association with this? Is there like some type of written agreement or written contract that describes the relationship? Many, in many cases, this gets overlooked.
And in some cases, what I’ve actually seen some businesses do is that they’ll make up a written contract that says, “Well, this person who is coming to work for me, agrees that he’s going to be an independent contractor.” And little fine details, basically, a contract written up to say they’re going to avoid playing paying the employment taxes, which is basically what it’s designed to get around. Now that how good that contract is, based on the words on the paper, I don’t know.
But oftentimes, when I’ve heard about that, I’ve read about that. I know experiences where I live, that I hear about these kinds of things, I’m like, I’m very suspicious of how valid that contract would hold up in either a State Department of Labor audit, or an audit by the IRS on employee classification. So we just got to be very careful with that. So just because we write up a contract, doesn’t mean that it will be honored in the event of an employment audit.
So are provided, are you providing the individual with employee type benefits? So are you trying to say, “Oh, well, we’re going to give you a 1099. But you know, we’re going to give you some really give you a little bit of insurance, we’re going to maybe help you on the retirement plan, are these other type of benefits?” Or “Oh, maybe you can take part in our dependent daycare, or our FSA for medical spending?” I mean, just are you providing these type of benefits to an individual but still giving them a 1099?
Well, if they’re giving them employee type benefits, then they are an employee. About the relationship, of course, in many states, you can basically quit or be fired for just about any reason. So how permanent is the relationship going to be? Usually if an employee, you’re looking at the person being with you over a longer period of time, whereas an actual contractor goes in for a specific job a specific occasion or two? And then they’re gone. And so also the how long that relationships gonna last, then the services that this person performs?
Are they part of the employer’s regular port of business? Yes. So if you have, perhaps an attorney that’s working outside of the office, is that employee is that an attorney that’s working for a law firm, an independent contractor or an employee, whether it could be a number of circumstances that fall into that. But yet, if that attorney is doing work, that is in course, with the regular business, that employee could be. Well, that lawyer could be an employee of the firm, even though he, in some ways may be acting like an independent contractor, but he still could be an employee. So just if you’re doing legal work still, in that particular example, you could still be an employee. And then as well as does this person have unreimbursed business expenses. Now, as an employee, you could have some unreimbursed expenses. And as a contractor, you can have expenses related to your particular trade, or whatever type of work or service that you’re performing, that the business that you’re doing the work for, does not give you compensation for.
So it’s those unreimbursed business expenses can be of course, if you’re an employee, who has these, of course, you can’t deduct these on your tax returns anymore. But yet, how much do you actually have? If a person has more, there could very well be a contractor depending on once again, what the circumstances are, and got to look at the whole big picture between behavior, financial, and relationship there. So all of that fits in?
Very closely got to look at all these considerations. When deciding, is this person going to be an employee? Or is this person going to be a contractor? Well, we’re gonna look at some industry considerations and take a look at statutory employees exactly what those are, as we’re going to return in just a couple of minutes here on The Tax Answers Advisor with Marcelino Dodge on The Voice America Business Channel.
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Are you wanting to grow wealth faster, save time and build a nest egg? Hire a tax pro who makes you money and does more than just file your tax return? Marcelino Dodge of Cash Tracks Financial identifies your key numbers, works year-round, improve your numbers, keeps you compliant and helps you achieve goals faster. Call Marcelino Dodge today, 719-336-8739 to schedule your free tax strategy review. Call 336-8739 or visit cashtracksfinancial.com.
Many people want to build wealth or grow their business faster, but do not know what specific numbers to look at that actually helped build monthly cash flow. Hire a tax pro who makes you money and does more than just filing your tax return? Marcelino Dodge of Cash Tracks Financial identifies your key numbers, works year-round to improve your numbers, keeps you compliant and helps you achieve goals faster. Schedule your free tax strategy review by calling 719-336-8739 or visit cashtracksfinancial.com.
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When it comes to business, you’ll find the experts here. Voice America Business Network.
This is The Tax Answers Advisor with host, Marcelino Dodge. To reach our program today, please call in the number is 1-866-472-5790. That’s 1-866-472-5790. You may also send an email to success@cashtracksfinancial.com. Now back to The Tax Answers Advisor.
Marcelino: Welcome back to The Tax Answers Advisor. This is Marcelino Dodge, appreciate you listening to the program today as we’re taking a ride talking about, “Are you an employee? Or are you an independent contractor?” Yes, this is a very important issue for employers who are hiring people to make sure they classify them correctly, because the tax penalties can just be awful. In this last portion here we’re going to talk about some considerations depending on industry that a person or employer is in. Some of the questions that come up.
Are they an employee? Are they independent contractor? Is it common practice in a certain industry? And in some industries, like I work a lot with truck drivers 1099s can may be common in the trucking industry also 1099 can also be common in agriculture. I see a lot of 1099 is issued out by farming operations that have like short term workers during the summer, help them out doing various aspects.
Because I’m not certain, in some of these cases if the 1099 is correct or not because I just see them coming in I don’t actually work with those individuals but I know it’s very common in agriculture. So then, how relevant are each of these factors in these industries? So, it’s just got it looks at very closely.
And this is why as I work with individuals and talk to employers, on issues such as this. I just sit down, go all these considerations with them and just make sure that they’re doing it correctly and in most cases, it’s usually not a big issue because most individuals reasonable individuals because that’s who I work with, they recognize oh yeah this would be properly classified as an employee. Yes, but just that we’re going to touch on here.
If they’re not classified as a regular employee, an area where ones might be would be, could be classified as what’s known as statutory employee, which is kind of a hybrid between employee and independent contractor. Because, for like employment taxes for your Social Security taxes and your Medicare taxes, a statutory employee is treated as a regular employee for these purposes. The difference being though with a statutory employee is not just a box checked on a W-2.
But the fact is, that a statutory employee can actually claim expenses that they have that they’re not reimbursed for by the employer but they can actually deduct these on a schedule C though, they’re not really in business, but they can deduct these. But there’s only four categories, that ones can actually qualify in to be able to be a statutory employee. So, if you’re in one of these categories. These are just going to be kind of a brief overview.
You need to be a driver who distributes beverages, except milk. Then beverages except milk, meat, fruit, or various big bakery products and if you’re paid on a commission that type of driver can be a statutory employee. This is also nice. And I love it. Actually, I shouldn’t say I don’t know if it’s nice or not, but it’s fascinating because I’m all I also work with life insurance, they work with several companies but if an individual sells life insurance full time, and primarily just for one company, they can be classified as a statutory employee, which could be very handy if the man is individual is very good at selling life insurance.
Also if they work from employer provided materials, basically employer provides materials they work for the employer, and then they course return everything to the employer. These can be a lot more specific each of these is kind of hit them. Now also, this could fall into a full time salesperson who works on behalf of the employer. And then they go on they sell merchandise, and this merchandise isn’t sold for retail, resale or supplies, and the buyer that’s buying a business or a buyer’s business, whoever’s purchasing these supplies, or perhaps purchasing inventory.
The person that’s selling into that full time salesperson could be classified as a statutory employee, and they can take a lot of expenses which is really nice. I’ve worked with these, this type of employee, and it’s very fascinating to fill out the form and to help them out there. And as a result of Tax Cut and JOBS Act, which regardless of whatever the media says, it did cut taxes on everybody. It was a beautiful thing. I had so many people in my practice, where I work, that had their taxes cut when you actually looked at the numbers. It was wonderful.
So don’t let anybody ever tell you that that was only for a certain class of people. No, it was for everybody across the board. So anyways, we look back at statutory employees here. There’s some other conditions to be a statutory employee that you need to have. One is contract for all services, you as an individual must perform those personally so, as you personally perform these services you take them, you work with them, you do them.
You do a fantastic job, you can be a statutory employee, as well as, as this type of statutory employee, you’re not putting a substantial investment into facilities, equipment or property which basically, you’re not really going to be a contractor, you’re not really self-employed, you’re not really setting up a place where you’re going to do business out of. But, you just take care of basic expenses as you go out and you sell the items you’re selling, or distributing the items you’re distributing, whatever the case may be, if you fall into one of the four categories. So you’re not putting that investment in there, and which also makes this possible. In these conditions is that you are servicing on a continuous basis, the same employer, which makes sense and this can make sense in this because you’re helping out a specific employer. Because that’s in this case, a certain contract out there, you’re getting an employer, you’re working for them, basically you’re just working for one.
But yet, because of the uniqueness of your position. You can be a statutory employee and then be able to deduct those expenses that you have that, if you’re a regular employee, you would not be able to take, but as a statutory employee, you take off the expenses on a schedule C, and then reduce your taxes. Yes, we want to make sure as individuals, especially employers here classify their workers correctly, that you do so, if they’re an employee, individual who basically you make the schedule for, you tell them how much they’re going to get paid.
You have a relationship with them that’s hopefully going to be long term. They’re definitely going to be your employee. If you have an individual who does some work on a temporary basis short term, comes and goes. They bill you for it which is a big part to make sure someone is an independent contractor is, do they invoice you? That is absolutely essential, especially with State Department of Labor’s, and they’re not only working for you, then they can be an independent contractor.
And if you’re not quite an independent contractor and not quite a full employee, while they may fall into this statutory employee area. Especially if they’re only working for you and they fall into the one, one of the four particular categories, that’s available for classification as a statutory employee. Yes. In working with individuals and working with businesses here to help you achieve both business and personal goals, discussions, such as this employee classification, with businesses, is what I do here Cash Tracks Financial.
Yes, I am Marcelino Dodge, which is just here to help you to understand these areas, so much better. You can always reach me via success@cashtracksfinancial.com. My phone number, 844-394-4287, also available on Facebook at Cash Tracks on Facebook. Yes, as a Office and Office that does more than just tax returns because everybody has goals because people start off a business and we’re not exactly sure where things are going in this next year.
But know that notice that there is help out there to help to guide you, to help you to make good business decisions, to help you to set goals, whether it be personal goals individual goals. Happy to reach those goals, as well as we don’t know what the tax frontier is going to be. There’s talk about certain raising of taxes. Our goal here is to do everything within the tax code that we can to help you to reach your goals and to help you to pay as little tax as possible, which there can be any number of suggestions that we make, but in the end, and when it really comes down to that. It really is up to you to make those adjustments, to make those changes. Now, as an Enrolled Agent, I provide services tax services throughout the United States for individuals and businesses which is when one of the really nice benefits of being an Enrolled Agent.
I’m not licensed by any particular state, licensed by the IRS to do tax returns, been doing it for 20 plus years now and met a lot of great people and want to continue to find and meet great people to help them out those who really want to work on and improve in doing their business goals and doing their personal goals. And with our year-round service that we do, can really help businesses like in these areas of employee classification as I spoke about today.
Can really help ones to reach their goals when you sign up into one of our programs, be it a personal or business bundle. Because each one is very specific to your particular goals, we help you to get the most out either your business life and your financial life there. There’s a lot of information that’s always coming out and one of the issues that I always have when I see various news stories and I talk about individuals, various individuals, is that I sit there and I just think, have they actually ever done, the tax return?
Have they actually talked to someone who does tax returns? Because whether it be some type of news person, or anybody out there who’s proclaiming this about taxes. Well, usually they just don’t know what they’re talking about because they haven’t actually done a tax return, they haven’t actually spoken to someone. Now, as we work with you to be able to develop your action plan. Sometimes in developing your action plan. This can include some areas such as life insurance, include some type of investments.
Now, we can help you to find these options, and to develop these options to be able to meet these goals. Also with our year-round service it’s a great proactive solutions, that helps you again because as we talk about in this program a lot. Especially as we look at what is happening with potential tax laws again, being proactive is going to be so, so necessary, which is what we strive to have everybody to do. And so yes, I definitely invite you to give me a call, I am in the midst of tax season here. I am very busy doing a lot of tax returns.
But yet, I really take pride, talking to individuals, and I do this podcast even during tax season just because I feel all of these issues are so important, and that you as a taxpayer person, you need to know these things. And there’s so much wrong information out there and I just feel it’s good for you to get accurate information to get the correct information. And so, when ones enroll into our programs, you get access to be able to talk to me year around.
Get a have nice web conferencing available, so no matter where you are, we’re invite you to schedule cashtracksfinancial.com, we can schedule a free discovery session to see if our plan will work for you. And then, perhaps move forward or, or move on, but we’re certainly here to be able to help you to do, and to be successful, either on an individual basis or on a business basis there. So, again you can reach me it’s, success@cashtracksfinancial.com.
Or, of course, my phone number 844-394-4287. Invites you to the website there which is Cash Tracks. It has really been a wonderful ride today, helping you to understand about classifying your employees correctly, and a few updates on the American rescue plan which we’re going to continue to talk about that off and on as the year goes along. So we’re gonna look forward to talking to you again next week at 9am Pacific, certainly thank you for listening today to The Tax Answers Advisor, I am Marcelino Dodge on the Voice America Business Channel.
Thank you for listening to The Tax Answers Advisor with host, Marcelino Dodge. We’ll be back again next Thursday at 12 noon Eastern time, and 9am Pacific time, on The Voice America Business Channel. We’ll have more to share next week.
Quick Contact
Phone: (719) 336-8739
Toll-Free: (844) 394-4287
Fax: (719) 336-8799
Email: success@cashtracksfinancial.com
Cash Tracks Financial Inc.
117 W Beech St
Lamar, CO 81052
Office:(719) 336-8739
Toll Free: (844) 394-4287
Fax: (719) 336-8799
Email: success@cashtracksfinancial.com
Quick Contact
Colorado Springs Call: (719) 359-8789
Lamar Call: (719) 336-8739
Toll-Free: (844) 394-4287
Fax: (719) 336-8799
Email: success@cashtracksfinancial.com
Resources
Resources & Articles For Managing Your Finances On Your Own
Taxes – Are You Classifying Your Employees Correctly?
Taxes – Are You Classifying Your Employees Correctly?
Are Your Employees Correctly Classified For Taxes? Transcript: When tax time comes around, are you being reactive or proactive? Do you find yourself swimming in a sea of questions? Get more information at the Accountant Advice for Employee Tax page.
Education Tax Credits Deductions Info Cash Tracks Financial
Are you receiving all the education tax credits and deductions possible? When tax time comes around, are you being reactive or proactive? Education and tax credits are a great way to reduce your tax obligation. Find out more at the Tax Credits and Deductions web page.
Coronavirus Pension Plan Distributions Options
What are the options for Coronavirus pension plan distributions? coronavirus-related distribution is a distribution made from an eligible retirement plan (including an IRA) to a qualified individual. Find out more at the Coronavirus Pension Plan Distribution page.
Contact Us
When you need help to prepare your tax return or to solve your tax issues contact Cash Tracks Financial Inc., serving Lamar, Colorado and Colorado Springs, Colorado.
Lamar CALL: (719) 336-8739 TOLL FREE: (844) 394-4287 FAX: (719) 336-8799
117 W Beech St, Lamar, CO 81052, USA
Colorado Springs CALL: (719) 359-8789 TOLL FREE: (844) 394-4287 FAX: (719) 336-8799
525 N Cascade Ave, #200, Colorado Springs, CO 80903 USA
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