YES, Employee audits IS A THING! Let our Jacksonville, FL CPA Assist You with Classification & Compliance
Are my contractors really employees?
What are the risks involved, and
How do I make sure I stay compliant with the employment laws?
These are the questions, as small business owners, we ask ourselves – or should be! In the ever-changing business taxation environment, this question of a contractor vs. employee classification, in Jacksonville and outside our local geographic area, has remained relevant for a good portion of the past decade. And even today, when it feels like the entire world has been turned upside down, and all rules seem to have been broken, this remains a current and relevant topic for us to worry about.
California, always a leader in adopting tax reform, is actively pursuing contractor vs. employment classification – and MIS-classification. This year, if you hire a person in the same line of work as your business, you MUST classify them as employees. Most prominently, that means that the thousands of Uber and Lyft drivers are now required to be classified as employees; no longer are they considered independent contractors, no longer can they file a Schedule C and claim business expenses. They will be forced to convert to the companies’ employees, as has just been confirmed by the Appeals Court in CA.
But this ruling affects many others, not just the Uber and Lyft drivers as seen throughout California, small business owners such as beauty salon owners, insurance agencies, contractors, restaurant owners – are learning that the workforce they have traditionally classified as independent contractors are now legally their employees, with all the consequences that bring about.
What this means to small business owners in other states:
Does this affect others living and working outside of California? Absolutely, you bet your sweet….bottom! You see, California has always been at the forefront of tax reform. Other states are quick to jump on this bandwagon. At the same time, others will also look to the Gold Rush State in how the independent subcontractors are to be treated very shortly! States already starting to follow in the trailblazer’s path include New York, New Jersey, and Illinois – each planning its own version of the legislation affecting the classification of the freelance workers.
What’s the difference:
As a small business owner, be responsible if you were to classify these freelancers as employees in an audit? Layers of taxation and compliance vary from state to state, and the main compliance points would be:
- The employer portion of Social Security and Medicare taxes
- Unemployment insurance
- Workers’ Compensation
- Local labor laws
- Federal and State payroll tax filings
Schedule a consultation with a Jacksonville, FL Small Business Accountant:
There may be more, but these consideration points are pretty universal, and you should be aware of it. If you think you may need to re-think your independent contractor employee classification, reach out to our Jacksonville CPA firm for a consultation. You may call us at 904-330-1200 or email at firstname.lastname@example.org.