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The Internal Revenue Service (IRS) has indicated that there will be increased efforts to crack down on employees who are being labeled as independent contractors or consultants.
Thus, employers who utilize independent contractors should make a distinction between their employees and their independent contractors. The following tips may be useful:
Finally, all of the above should be memorialized into an independent contractor agreement. Failure to distinguish between employees and independent contractors could mean increased workers' compensation and disability insurance costs, along with tax withholding. |
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Most businesses are familiar with the use of Form 1099 for payments to independent contractors. However, effective January 1, 2012, both small and large businesses will be required to issue a 1099 to every vendor to which payments of $600 or more were made during the preceding calendar year. For example, if your small business purchases a Dell computer for $800 in 2012, your small business will need to issue a Form 1099-MISC to Dell.
The impact on all businesses is obvious - much more paperwork and more record-keeping. Although more than a year remains until the requirement goes into effect, all businesses could use 2011 to prepare for the new reporting requirement by reviewing their current record-keeping methods. |
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The Small Business Health Care Tax Credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees.
To be eligible, a qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate. Further, a qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible). Finally, a qualifying employer must pay average annual wages below $50,000. The credit is worth up to 35 percent of a small business' premium costs in 2010. On January 1, 2014, this rate increases to 50 percent. The credit phases out gradually for employers with average wages between $25,000 and $50,000 and for employers with the equivalent of between 10 and 25 full-time workers. |
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Effective January 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained.
However, this does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. Employers and employees should take these changes into account as they make decisions regarding Flexible Spending Arrangements for 2011. Prepared by Manik J. Saini |
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