Payroll taxes unpaid are the largest reason for business ventures to fail. Payroll tax problems are the one most time consuming element of my assistance to my clients. If you do not understand these last two sentences or if you do not understand the rules of paying employees, then you may as well never go in business for yourself.
The rule is simple - never get behind. If you hire contract laborers then you must have a folder for each and every one of them, and in that folder should be:
1.) Subcontract agreement (See me for examples. Have one drawn up by your attorney)
2.) Copy of drivers license.
3.) I-9 Department of Labor Form.
4.) Copy of social security card.
5.) Copy of persons business card or any of their advertising brochures.
If you have all of the above, your chances of a sub contractor, years later, telling the IRS that they were employees—this possibility becomes lessened. If a sub does complain to the IRS and you do not have all of the above things, then “Give Over” because the IRS will take their word.
If you hire employees your company should have an employee manual (see me for examples) If you hire employees you should have a folder as shown above for each and every employee as well as this:
1.) Becomes an employee agreement as spelled out in the company manual.
2.) Copy of W-4 exemption form signed by the employee
3.) Time card information and example If you have all of the above then your exposure for an employee suing you, becomes much less
Copyright © Michael G Thomas CPA.