Avoiding payroll taxes by intentionally or unintentionally misclassifying employees as independent contractors can lead to a costly mistake for your business. Here’s how to avoid it:
Keep in mind that how the government classifies employees is what matters.
- When it comes to payroll taxes, an employee is considered to be anyone who performs services for your institution if the as an employer you can control what will be done and how it will be done.
- In contrast, when an independent contractor relationship exists, your company has the right to control or direct only the result of the work done, and not the means and methods of a accomplishing the result.
The best way to avoid penalties related to worker misclassification is to be honest about the role workers play in your organization. If you are using independent contractors, make sure you have detailed agreements in place to define their responsibilities and their relationship to your company. If you need assistance in regard to proper worker classification rules. Please contact us our NYC CPA.