Are You Compliant?

As a business owner myself for the last two decades, I understand not wanting to pay a dime more than you have to for supplies, taxes, labor, or fees. One of the hallmarks of small businesses is that we often operate with very slim margins, so every dollar matters. So when the topic of employee classification comes up, it's important for us to get it right.

First, let's get the obvious out of the way. Misclassifying employees can cost your business big time. If you have been paying an employee as an independent contractor but they are functioning as an employee, you are risking a lot. The IRS can go back for the entire time the employee has worked for you, collect payroll taxes, and assess penalties and fees.

A Story about this

I hear stories from business owners around the country that will put fear into the toughest person. One story I heard was about a gym in California that misclassified its personal trainers as independent contractors for six years.

The result?

The IRS went back six years worth of payroll taxes, and assessed penalities and fees to the business owner. The damage cost him $81,000.

Other Obligations

You may think that your obligations may stop at just paying independent contractors, and that's it, but you have a few more obligations than that. In an interview this week with a business insurance broker, we discussed this issue. For example, did you know that if an independent contractor does not have workers compensation insurance, you are responsible for obtaining it for the job you have the work? Knowing this simple fact will allow you to require them to present you with a certificate of insurance before starting a job with you.

Business Insurance Explained: EVERYTHING You Need To Know

Resources for Learning

I want to express a big thank you to Kate Krebsbach from the Scully Insurance Group for providing me with the following resources regarding independent contractors. Make sure you download and educate yourself. To download the click one of the guides.

Department of Labor Rules Regarding Independent Contractors

DOL Independent Contractor Rule.pdf

Hiring Independent Contractors

Hiring Independent Contractors.pdf

Do You Have An Independent Contractor or Employee

Independent Contractor or Employee.pdf

Quote of the week

Do more than is required. What is the distance between someone who achieves their goals consistently and those who spend their lives and careers merely following? The extra mile.

-Gary Ryan Blair