Year End "Must Do's" and Contractor FAQ's
Keep Your Business Compliant in 2011
It's hard to believe that another year is drawing to a close. Although, with the business challenges that many have faced in 2010, maybe a fresh new year is a reason for celebration. Well don't start popping the champagne just yet! If you have employees, there are a number of things that you should do to make sure that your house is in order before the sun sets on 2010.
If you are having difficulty accomplishing the above - not enough time, not enough information, have other questions - call us. All of these items are routinely handled by the staff at Advantage Employment. We would love to help make your year end worry free.
- Employee Information Updates - Provide all of your employees with an information update form so that you can verify personal information such as address, personal email address, and emergency contact information. Make sure any changes are communicated to your payroll processing company.
- Update I-9 Forms - If any documents with an expiration date have expired, the I-9 form is no longer valid. Be sure to request updated documents from the employee to remain in compliance.
- Verify accuracy of insurance premium deductions - If employees made changes to their insurance coverage, or your plan costs have changed, employee contribution amounts are likely to have changed too. If the proper amount is not deducted from the paycheck, the company could be losing substantial amounts of money to cover this large cost.
- Determine Taxable Fringe Benefit amounts - If employees received Third Party Sick payments, used their company car for personal use, or received Group Term Life Insurance valued at over $50,000, information will need to be reported on the W2. Be sure your payroll processing company is made aware of these items before end of the year processing is complete.
- Plan for year end bonuses - If bonuses will be paid to any employees, be sure to coordinate timing with your payroll processor. Make sure that no extra fees will be incurred for an additional paycheck run.
- Review holiday payroll schedule - Check the holiday work schedule and determine if that will impact your regular payroll dates. Confirm when payroll will need to be submitted to meet Direct Deposit requirements, and to get your employees paid on time.
- Pay out unused vacation time - If your policy does not allow for carry over, but promises a pay out of unused vacation at the end of the year, be sure to notify your payroll processor, and provide payout amounts.
- Update Employment Status - If any of your employees have added hours, reduced hours, changed work locations, or changed duties substantially, then their employment status might change which could impact their benefits eligibility. Refer to definitions in your Employee Handbook, and make the necessary changes in order to stay compliant. See the article below regarding W2 vs. 1099 classifications.
Have a wonderful Holiday Season!
Sandra Teague, SPHR
|Employee (W2) vs. Independent Contractor (1099) - Which is correct?|
It seems like such an easy decision to make; hire a person as an Independent Contractor and avoid all the hassle and expense of payroll taxes. Doing this incorrectly however could result in large fines and payment of back taxes. For a complete article pulled from the IRS's Publication 15a, CLICK HERE. Otherwise, here are a couple of quick tips:
What factors determine how an individual should be classified?
The determination is made based on an evaluation of three things: Behavioral Control, Financial Control, and Type of Relationship.
As a W2 Employee - The employer directs the employee on when and where to do the work, what tools or equipment to use, and what workers to hire or to assist with the work. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. An employee is often trained to perform services in a particular manner using the company's methods.
As a 1099 Contractor - The individual already possesses the skills necessary to do the job. He or she is given a defined project to complete, and will determine independently the best way to complete the work. Contractors may have un-reimbursed business expenses, and may also provide their services to other companies at the same time. Payment is usually a flat fee based on completion of a defined project, but in some professions, payment may be based on an hourly rate.
What does it really cost a company to hire someone earning $800 per week?
As a W2 Employee - The company must pay the gross wages of $800 plus the employer share of the FICA tax (7.65%) plus state and federal unemployment taxes.
As a 1099 Contractor - The company must pay $800. All taxes become the responsibility of the individual.
What forms need to be filled out when I hire this person?
As a W2 Employee - The employee must complete a W-4 and in Illinois, an IL-W-4. This gives the employer the information necessary to withhold the proper amount of state and federal income tax. A personnel file should be created and maintained and should also contain an I-9 form, employment application, and other employment related documentation.
As a 1099 Contractor - The contractor must complete a W-9 form. This provides the company the tax ID number that should be used to prepare the 1099 at the end of the year. A vendor file should be created and maintained and should contain any written contract or agreement made between the parties.
This is a complex issue, and not one to be taken lightly. The IRS provides assistance by way of the SS-8 Form. This form enables an employer to receive a "Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding." By letting the IRS make the decision, you are certain to avoid any problems down the road. Keep in mind that the SS-8 form can be used by an employee as well if they feel that they are being misclassified by their employer.
|How HR Outsourcing Saves Money
In good times or bad, companies are always looking for ways to cut costs and function better, yet more efficiently. A key target area is employment. While wages and benefits should be maintained at competitive levels, the cost of administering employment can be reduced. Here are just a few ways that Advantage Employment helps its clients:
- Eliminate the internal cost of an HR administrator and outsource those duties for less.
- Stop allocating high level executive time to handle sensitive or confidential HR issues. Focus on your business instead.
- Stop paying an outside payroll provider steep rates for minimal do-it-yourself service.
- Reduce your exposure to dangerous lawsuits by enlisting the help of HR professionals. Show your employees that policies are sound, and prevent trouble makers from taking advantage of a loosely run organization.
- Reduce turnover in your staff by maximizing their understanding and utilization of the employee benefits that you already provide to them.
- Increase employee loyalty by providing them a resource to solve any employment question or problem.
- Don't lose a protestable unemployment claim. Each person who gets unemployment benefits who shouldn't can cost your company $4K to $6K in increased taxes each year.
- Don't let workers comp claims malinger. Improper case management and lack of a return-to-work plan will increase the cost of the claim and increase your mod.
To view previously published newsletters, click below.
Advantage Employment, Inc.
2021 Midwest Road
Oak Brook, IL 60523