(and the implications of handling either inappropriately)
TRANSCRIPT
(and the implications of handling either inappropriately)
It is VERY important to have a conversation with your Accountant and/or Lawyer to determine what type of entity you should choose for your business, not only for liability purposes, but also for tax implications
Types of entities include: Sole Proprietorship LLC S-Corp C-Corp
IRS Common Law Test This is a test that helps determine whether
one is a 1099 independent contractor or an employee
Questions include: Does the worker stand to realize a profit or
suffer a loss as a result of his/her services? Does the worker have control over his/her own
schedule? Is work conducted on the business’s premises
or can it be conducted off the premises?
Compliance
• Workers Compensation
•Department of Labor (DOL)
• New Hire Reporting
• Human Resources
• Immigration
Taxes
• Federal Income Tax (FIT)
• State Income Tax (SIT)
• Federal Unemployment Tax (FUTA)
• State Unemployment Insurance (SUI)
• FICA (Social Security and Medicare)
Workers Compensation is a form of insurance that provides wage replacement and medical benefits for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence
When you file your Quarterly 941’s with the Fed & State, the State checks to determine that you have an active Workers Comp policy
If you do not have an active policy, then you will receive a VERY scary letter that provides you with your court date and notifies you that your fine will be up to $10,000
The Department of Labor exists at both the federal and state level and is responsible for promoting working conditions of wage earners in the United States
Labor Law Posters are for your employees’ benefit to inform them on their rights and must be in an area where they are visible every day
Labor Law Posters include: Minimum Wage Laws, Non-Discrimination Notices, Equal Employment Opportunity, OSHA, Workplace Harassment…and how to report violations
Fines range from a warning to $17,000
States across the U.S. are increasing the number of Department of Labor Auditors
New Hire Reporting (NHR) is the reporting of an employee’s information (W-4/I-9) to the State in the timeframe required by law
In the State of Maine you have 7 days to report your new hires
New Hire Reporting is Federal law, supported by each state
If an employee has a garnishment and/or outstanding unemployment claim and they are not reported to the State, then the employer can be held liable for garnishments not withheld from the employee
Human Resources is the department of a company responsible for employee relations
In most small businesses the Business Owner functions as the Human Resources Department
On the most basic level, the Business Owner will want to make sure that the business is in compliance and up-to-date with all workplace laws and legislative and tax changes
Important to have up-to-date Employee Handbooks and Job Descriptions
Employee Handbooks are a means of relaying your policies and procedures to your employees
Job Descriptions provide the specific job functions and expectations of the employee
The average law suit is over $300,000
The total amount of wages and salaries paid by a company to its employees
The financial records for employee wages/salaries, withholdings, deductions, bonuses, and any other items on an employee’s paycheck
Calculation of taxes due by both the employee and employer and the necessary payment of those taxes
FIT, SIT, FUTA, SUI, FICA
The above taxes are all different percentages of gross payroll (minus any pre-tax deductions) and are due at various times
FIT and SIT rates are based on total income and current tax tables
Lookback Period determines deposit frequency Example: July 1, 2010 – June 30, 2009 – four quarter
lookback of the previous year If you reported $50K or less you are a monthly
depositor; over $50K you are a semi-monthly depositor
Unemployment Taxes are due on a Quarterly basis
The amount of State Unemployment Tax owed is based on your Experience Rate
An Experience Rate is a percentage assigned to a business based on its industry and number of years in business--this rate changes every year
Federal Income Contributions Act (FICA) A payroll tax imposed by the federal government on
both employers and employees to fund Social Security and Medicare
In 2011, FICA rates for Employers are: 6.2% for Social Security 1.45% for Medicare Totaling 7.65%
In 2011, FICA rates for Employees are: 4.2% for Social Security 1.45% for Medicare Totaling 5.65%
If you pay your taxes by the due dates and accurately, but do not include the proper filing, then you may pay a penalty
Failure to File Penalty is usually 5% for each month or part of a month that a return is late, but not more than 25%
Failure to Pay Penalty is ½% of unpaid taxes for each month or part of a month after the due date that a tax is not paid
Combined Penalties are reduced by the Failure to Pay Penalty (so 4 ½% to 24 ½%)
Accuracy Penalty is equal to 20% of the underpayment
Don’t forget interest! It often takes the government several months to
realize that there was an inaccuracy and/or late payment/filing, which means that you will also pay interest
And if you do not pay your taxes at all, what happens? The IRS will eventually take control of your bank
account(s) and you will go to jail
Anthony TalientoDistrict Manager
ADP Small Business Services(207) 408-7299
THANK YOU!!!