Financial Fitness - Fall 2012
Fall 2012 PDF
Fall 2012 Articles
- Health Care Reform Act: “The Penalty Tax”
- Employee or Independent Contractor?
- Clarified U.S. Auditing Standards
- Did You Know?
- Annual Lease Value Calculation (Auto Add-back)
- The Affordable Care Act is Phasing in ... Are You Prepared?
- Key Benefit Plan Limits for 2013
- Putting Together Your Tax Information: The “Short List” for Businesses and Individuals
- Average Itemized Deductions
- Income Tax Rates 2012
- 2013 Wage/Tax Facts Quick Reference Guide
Rachael L. Mostoller
One would think such a classification would be an easy answer, but as the IRS continues to add additional regulations the answer seems even harder to find.
Generally, an employer is required to withhold income taxes, Social Security, Medicare and unemployment taxes for each employee, as well as pay the employer portion of Social Security and Medicare. With an independent contractor, the company is not required to withhold or pay any taxes; this responsibility lies with the independent contractor.
Although the tax consequences of these classifications are important, it is also important to consider some of the other benefits. Such benefits as health insurance, vacation pay, 401K, etc. are available to employees, but not independent contractors.
While normally the IRS is only concerned with the tax consequences of this decision, the Patient Protection and Affordable Care Act (PPACA) will no doubt increase the scrutiny of the employee vs. independent contractor decision in regards to employer provided health insurance. Beginning in 2014, the PPACA will begin to impose penalties on certain large employers that do not provide access to health insurance or an affordable health insurance option.
This creates more pressure on an already complicated decision, but the IRS does offer tools to assist you in making the correct determination on their website — www.irs.gov.
To ensure compliance with requirements imposed by the IRS, please note, any advice contained in this publication was not intended, or written, to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. This publication is distributed with the understanding that the publisher and distributor are not providing legal, accounting or other professional advice and assume no liability whatsoever in conjunction with the information contained within this publication.