April 2010 Archives

The Internal Revenue Service is cracking down on the "independent contractor vs employee" question in a new program. As a result, small and large businesses alike are on their toes.

Watch out for misclassification of employees and workers.

It's a huge money-saver for a small business to get into the practice of working with independent contractors. There is a lower tax bill, less withholding to be responsible for, and in some states, fewer obligations under workers' compensation requirements.

So, small businesses do what they think is a smart thing to do. They "hire" independent contractors and tell the contractors to be responsible for their own taxes.

Now, the IRS is catching on, while hoping to catch some employers with discrepancies. Although employment law is an area of law that stands on its own, the laws differentiating between employee status and independent contractor status are governed, in part, by tax law concepts.

Healthcare laws and health insurance have long been areas of contention for small businesses. The expense of issuing health care insurance would often be the factor small businesses would consider before hiring a permanent employee versus a temporary contract employee.

Now, healthcare laws have changed and reform has arrived.

And the Obama Administration promises to take the pain out of healthcare insurance for small businesses.

Two pieces of legislation were passed to that extent: The Patient Protection and Affordable Care Act (PL 111-148) and the Health Care and Education Reconciliation Act of 2010 (PL 111-152). The budget reconciliation process essentially amended certain provisions of the first act and added some new provisions of its own.

The thing about budget reconciliation is this: The budget reconciliation act must deal with budgetary issues. As such, it's no surprise to anyone that the new health care laws will have an impact on the Internal Revenue Code. But how does all this shape up for the business owner? Let's have a look: