Small business owners often clash with the IRS over the classification of workers. Usually, the employers claim certain workers are independent contractors; the IRS says they’re employees.
Strategy: If you’re challenged by the IRS, don’t throw up the white flag so fast. It’s an uphill battle, but you can prevail if you have a legitimate gripe and stick to your guns.
Here’s the whole story: If a worker is classified as a “common law employee,” you must withhold federal income tax and the employee’s share of Social Security and Medicare taxes (FICA). Even worse: You must pay the employer’s share of Social Security and Medicare taxes and the federal unemployment tax (FUTA). Finally, you must issue Form W-2 for the wages and send a copy to the IRS.
In contrast, if a worker qualifies as an independent contractor, your business doesn’t have to worry about federal income tax withholding, the Social Security and Medicare taxes, or...(register to read more)