employees - Linkenheimer LLP CPAs & Advisors

If You’re Hiring Independent Contractors, Make Sure They’re Properly Handled

Many businesses use independent contractors to help keep their costs down — especially in these times of staff shortages and inflationary pressures. If you’re among them, be careful that these workers are properly classified for federal tax purposes. If the IRS reclassifies them as employees, it can be an expensive mistake.

The question of whether a worker is an independent contractor or an employee for federal income and employment tax purposes is a complex one. If a worker is an employee, your company must withhold federal income and payroll taxes and pay the employer’s share of FICA taxes on the wages, plus FUTA tax. A business may also provide the worker with fringe benefits if it makes them available to other employees. In addition, there may be state tax obligations.

On the other hand, if a worker is an independent contractor, these obligations don’t apply. In that case, the business simply sends the contractor a Form 1099-NEC for the year showing the amount paid (if it’s $600 […]

By Linkenheimer LLP|2023-05-16T13:03:05+00:00May 16th, 2023|business, employee|0 Comments

Businesses Can Show Appreciation — and Gain Tax Breaks — with Holiday Gifts and Parties

With Thanksgiving just around the corner, the holiday season will soon be here. At this time of year, your business may want to show its gratitude to employees and customers by giving them gifts or hosting holiday parties again after a year of forgoing them due to the pandemic. It’s a good time to brush up on the tax rules associated with these expenses. Are they tax deductible by your business and is the value taxable to the recipients?

Gifts to customers

If you give gifts to customers and clients, they’re deductible up to $25 per recipient per year. For purposes of the $25 limit, you don’t need to include “incidental” costs that don’t substantially add to the gift’s value. These costs include engraving, gift wrapping, packaging and shipping. Also excluded from the $25 limit is branded marketing items — such as those imprinted with your company’s name and logo — provided they’re widely distributed and cost less than $4.

The $25 limit […]

By Linkenheimer LLP|2021-11-15T23:54:48+00:00November 15th, 2021|business, deduction, deductions, employer|0 Comments

New Per Diem Business Travel Rates Became Effective on October 1

Are employees at your business traveling again after months of virtual meetings? In Notice 2021-52, the IRS announced the fiscal 2022 “per diem” rates that became effective October 1, 2021. Taxpayers can use these rates to substantiate the amount of expenses for lodging, meals and incidental expenses when traveling away from home. (Taxpayers in the transportation industry can use a special transportation industry rate.)

Background information

A simplified alternative to tracking actual business travel expenses is to use the high-low per diem method. This method provides fixed travel per diems. The amounts are based on rates set by the IRS that vary from locality to locality.

Under the high-low method, the IRS establishes an annual flat rate for certain areas with higher costs of living. All locations within the continental United States that aren’t listed as “high-cost” are automatically considered “low-cost.” The high-low method may be used in lieu of the specific per diem rates for business destinations. Examples of high-cost areas include Boston, […]

By Linkenheimer LLP|2021-10-11T19:37:31+00:00October 11th, 2021|expensing, travel|0 Comments

California Tax Updates for 10/6

Update 1:

Recent legislation in California helps warehouse employees. The legislation prevents warehouse employers from terminating workers for failing to meet quotas that interfere with rest breaks, effective Jan. 1, 2021. Specific employers must give each nonexempt employee working in a warehouse distribution center a written description of each quota to which the employee is subject. Quotas must include the number of tasks to be done or materials to be produced or handled, the timeframe for completion, and possible consequences if quotas aren’t met. Employees won’t be required to meet a quota that prevents compliance with meal or rest periods, use of bathroom facilities, or health and safety laws.

Update 2:

California Governor Gavin Newsom is considering several payroll-related bills. Among them are a bill that would require food delivery platforms to pay any gratuities in full to the person delivering the product. Any tip paid on a pickup order would be paid in full to the food facility. Also being considered is […]

By Linkenheimer LLP|2021-10-06T22:45:57+00:00October 6th, 2021|CA tax, california|0 Comments

Help Ensure the IRS Doesn’t Reclassify Independent Contractors as Employees

Many businesses use independent contractors to help keep their costs down. If you’re among them, make sure that these workers are properly classified for federal tax purposes. If the IRS reclassifies them as employees, it can be a costly error.

It can be complex to determine whether a worker is an independent contractor or an employee for federal income and employment tax purposes. If a worker is an employee, your company must withhold federal income and payroll taxes, pay the employer’s share of FICA taxes on the wages, plus FUTA tax. A business may also provide the worker with fringe benefits if it makes them available to other employees. In addition, there may be state tax obligations.

On the other hand, if a worker is an independent contractor, these obligations don’t apply. In that case, the business simply sends the contractor a Form 1099-NEC for the year showing the amount paid (if it’s $600 or more).

What are the factors the IRS considers?

By Linkenheimer LLP|2021-05-12T15:55:30+00:00May 12th, 2021|business, employer, irs|0 Comments