Paying Workers ? What Can You Write-Off?

As your business grows, you are going to need help. This help comes in the form of employees and independent contractors. What you can write-off is dependent upon how your helper is classified ? as an employee or independent contractor.

Independent Contractor

Whenever possible, you want to use independent contractors to assist you. Payments to independent contractors are completely deductible. You simply claim the deduction on your return. If you pay them more than $600 during the tax year, you also must issue a 1099-MISC in January of the following year. Importantly, you do not have to pay employment taxes or make withholding on the compensation.

Unfortunately, the IRS doesn't allow you to randomly classify a worker as an independent contractor. The key to the determination is whether you "control" the actions of the worker. Generally, you must be able to show the IRS that the worker is an independent contractor because they have the ability to control the details and means by which the work is accomplished. To this end, it is helpful to show the worker sets their own ours, has a work place and risks not getting paid if the work is below standard.

Employee

If your worker is classified as an employee, the tax burden increases. Under federal law, you are responsible for paying employment taxes related to the worker, even if there is only one.

Initially, you must withhold FICA, Social Security and income taxes from employee paychecks. As an employer, you must also contribute FUTA payments on your own, to wit, they are not deducted from the employees pay.

FICA stands for the Federal Insurance Contribution Act. This Act created a system to collect and provide benefits for workers who retire, are injured or become disabled. FICA is better known as Medicare.

FUTA stands for the Federal Unemployment Tax Act. This Act created a system to provide unemployed workers with temporary benefits until they obtain a new job. The system works in tandem with state unemployment acts. Most consider it a disaster, but you still have to pay.

In Closing

As you can see, it is cheaper to use independent contractors versus employees. The tax burden is significantly less, but make sure the IRS doesn't reclassify them as employees.

Richard Chapo is with http://www.businesstaxrecovery.com - recovering overpaid taxes for small businesses. Visit our article page - http://www.businesstaxrecovery.com/articles - to read more tax articles.

In The News:

How to correct mistakes made at the time of paying income tax  Economic TimesAt the time of filing income tax return (ITR), if there is any income tax payable pending, then you are required to pay it before completing the process of ITR filing.
The new tax plan |India Today Insight  India TodayThe Modi government considers a Donald Trump-style overhaul of India's direct taxes to increase compliance and reduce 'tax terror'.
Direct Tax Code: All you need to know about govt panel's recommendations  India TodayThe committee has highlighted the need to review existing tax brackets, surcharges and implementation of special guidelines for startups. Concessions have ...
View: NDA government could reform India's regressive taxation philosophy  Economic TimesRemoving bias in tax treatment can lead to better allocation of resources & end investments slowdown.
Stimulus package: How the rollback of surcharge works  BusinessLineNo relief for other capital gains, such as the sale of unlisted equity shares, debt instruments, salaries, income from house property, business income, and other ...
India needs single corporate tax rate of 25%: report  LivemintNEW DELHI : The Indian government should move towards a simple tax structure with a single corporate tax rate of 25%, without any surcharge or cess above it, ...
A.P.’s tax revenues from petroleum products dip in Q1  The HinduTax revenues from petroleum products are on the decline in the State. Collections were a mere ₹ 3,228.83 crore during the first quarter of this fiscal compared to ...
Govt gives businesses four months to settle indirect tax disputes  LivemintNEW DELHI : Businesses can now settle their pending disputes relating to central excise duty and *service* tax within four months starting 1 September under the ...
Small startups with turnover up to Rs 25Cr to get promised tax holiday: CBDT  YourStoryIn a statement, the CBDT stated that startups will continue to receive the tax holiday as specified in the Section 80-IAC of the Income Tax Act, 1961.
Small startups may not get promised tax holiday  Economic TimesNEW DELHI: Indian startups with turnover in excess of Rs 25 crore may have to pay income tax even though they may be eligible for the three-year tax holiday ...
How a small tax-paying elite funds the Indian state  LivemintThe top 1% individual taxpayers contribute nearly one-third of India's taxes, while the top 5% contribute nearly two-thirds of all the taxes collected.
Govt withdraws higher surcharge tax on FPIs and domestic investors  Economic TimesThe FM said Rs 70000 crore will released upfront to PSU banks for additional credit facilities.
Policy | Put an end to tax terrorism  Moneycontrol.comAbhijit Kumar Dutta. The unfortunate death of Cafe Coffee Day founder V G Siddhartha last month has left an unlikely sufferer — the income tax department.
How to claim and track income tax refund  LivemintThe only way to get an income tax refund is to file your income tax returns (ITR).It is important to keep an eye on processing of ITR and refund claim status.
Direct Tax Code may help bring change in mindset of taxpayers, authorities  Business StandardThe report by the panel on the Direct Tax Code, currently under the consideration of the government, is believed to have suggested several measures to reduce ...
Brave New World: Uncle Sam is taxing robots as companies invest in advanced tech  New York Post Uncle Sam is padding the Treasury with millions of dollars to assess bots at the same time that corporations invest more in advanced technology and ...
Govt forms committee to rationalise additional taxes on Aviation Turbine Fuel  MoneycontrolThe Aviation Ministry has formed a committee to rationalise additional taxes that airlines have to pay while uplifting Air Turbine Fuel (ATF) at airports across India ...
Solution to India’s economic malaise lies in cutting taxes and regulation  BusinessLineRather than lower the role of government, Modi has stepped up regulations and enforcement to draconian levels all to justify good governance.
Income Tax filing: Here's what'll happen if you miss ITR filing last date  Business TodayIf you still haven't filled your Income Tax Returns then you must act fast! August 31 is the deadline to file your I-T Returns. If you fail to file your taxes then you will ...
In relief to tax-payers, 2 more ITR forms will be pre-filled from FY21  BusinessLineTwo more forms for filing Income-Tax Returns (ITR) will be pre-filled from the next financial year (FY21), which will provide relief to taxpayers who do not seek ...
Direct tax committee calls for major changes to reassessment rules  Business StandardThe government-constituted task force for re-writing the direct tax legislation has suggested major changes in provisions for reopening and reassessment, in a ...
Income Tax Department issues checklist to trace unaccounted demonetisation cash  Economic TimesNEW DELHI: In a bid to seize illegal cash, the Income Tax Department has issued a 17-point checklist to tax commissioners across the country to track those ...
ITR forms with pre-filled investment data soon  Economic TimesPre-filled forms will soon be able to pick salary breakup directly from an individuals Form 16.
Got an income tax notice? Now you can check if it is real or not  Economic TimesYou can now check if the income tax notice or order that you have received is genuine or not. The income tax department has launched a facility on its e-filing ...
Software firms want SEZ sops to stay, seek tax cut  Economic TimesPropose extension of Special Economic Zones benefits for 20 more years; cite lower tax in other nations.
Cheer for the startup sector as FM relaxes angel tax rules  LivemintBENGALURU : Finance minister Nirmala Sitharaman said startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT) will be ...
In Reversal, Trump Says He Is No Longer Considering Tax Cuts  The Wall Street JournalPresident Trump ruled out a cut in the payroll tax and also said he wasn't looking to reduce capital-gains taxes by indexing gains to inflation.
CBDT extends angel tax relief to startups facing tax demands  LivemintThe move seeks to ensure that genuine entrepreneurs are not affected by the provision that allows the government to demand tax on share premium, treating it ...
British citizens born in US risk having UK bank accounts frozen  The GuardianTens of thousands of British citizens born in the US but who left when only a few months or years old risk having their bank accounts in Britain frozen because of ...
DTC panel's proposals may focus on cleaning up, making tax code more efficient, says A Prasanna  MoneycontrolThe focus of the Direct Taxes Code (DTC) panel, which has submitted its recommendations to finance minister (FM) Nirmala Sitharaman, is likely to be on ...
Death and taxes – Ohio Ag Net  Ohio's Country Journal and Ohio Ag NetBy Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs. Most of us have heard the quote from Benjamin Franklin, “In this world, nothing is ...
Sajid Javid will 'simplify' the tax system in first Budget  BBC NewsChancellor Sajid Javid has said he wants to simplify the tax system ahead of his Budget in the autumn. In his first interview since becoming chancellor, Mr Javid ...
How a Totally Hypothetical Payroll Tax Cut Would Impact Your Paycheck  Lifehacker AustraliaFor a portion of this calendar week, President Donald Trump considered cutting payroll taxes. “I've been thinking about payroll taxes for a long time,” he told ...
European Union will retaliate if US taxes French wine  The Brussels TimesPresident of the European Union Donald Tusk warned Donald Trump the European Union will retaliate if the US introduces a customs tax on French wine.
Lawmakers missed a prime opportunity to cut taxes in first session  The Maine WireIt's no secret that Maine state government's primary sources of revenue are generated through the individual income tax and sales tax. According to the latest ...
Trump’s wild week of tax ideas continues with new promise if GOP sweeps in 2020  The Washington PostThe president said in a tweet that he would pass a “major" middle-class tax cut, the latest in a string of varying tax pledges that he has made in the past week.
India plans extra tax on vegetable oil imports to boost domestic output: Sources  Economic TimesIndia is the world's biggest importer of vegetable oils, buying nearly $10 billion worth a year, its biggest import after crude oil and gold.
The Moneycontrol Show | Investing in NCDs, Direct Tax Code, Market Strategies  MoneycontrolSantosh Nair, Editor, Moneycontrol wraps the week's market action.
What is Direct Tax Code? Report likely today  LivemintThe new direct tax code will try to make personal income tax rates more 'progressive'.Prime Minister Narendra Modi had last year told tax officials that the old ...
Targeted low-income tax benefits mean huge penalties for working families: CD Howe  Canada.comPhoto by Getty Images Would you go to work tomorrow, if it meant losing 50 per cent of your income to taxes? What if you were losing 80 per cent of your wages?
GST on electric vehicles, chargers slashed  BusinessLineThe Goods & *Service* Tax (GST) Council on Saturday decided to lower the duty on all electric vehicles (EVs) and the charger for such vehicles. This is the ...
Income Tax Returns filing: DIAL to help 1200 taxi drivers file I-T Returns for free at Delhi airport  Business TodayThe Delhi International Airport Limited (DIAL) has announced that as part of its social responsibility, they will help 1,200 taxi drivers in Delhi-NCR file their ...
Tighten scrutiny of tax exemption claims on farm income: CAG to I-T Departement  LivemintClaims of tax exemption on farm income have attracted the attention of the Comptroller and Auditor General of India (CAG), which has called for greater efforts to ...
European Council President Warns EU Will Retaliate If Donald Trump Taxes French Wine  HuffPostEuropean Council President Donald Tusk warned Saturday that the European Union will retaliate if President Donald Trump pushes forward with his threatened ...
Finance Ministry to cut tax on prize post PM nudge  Economic TimesNEW DELHI: The Finance Ministry has withdrawn the tax exemption it had granted to the cash prize of Rs 1.3 crore received through the Seoul Peace Prize by ...
Govt plans extra tax on vegetable oil imports to boost domestic output: Sources  MoneycontrolIndia plans to impose an extra 5 percent tax on vegetable oil imports within weeks and use the revenue to help boost the country's stagnating oilseed production, ...
FM Nirmala Sitharaman makes startup bets less taxing for angels  Economic TimesUnion finance minister Nirmala Sitharaman announced a slew of relief measures for a slowing economy, including the scrapping of the “angel tax” for startups.
Tax resolution, amnesty scheme announced  The HinduThe government has announced a new scheme aimed at eliminating the bulk of pending tax dispute cases besides providing partial amnesty to those having tax ...
Income tax changes to 'cheaper' home, auto loans explained in 10 points  LivemintFinance Minister Nirmala Sitharaman today announced a host of measures to revive the economy and shore up market sentiment, including steps to bring down ...
Officials: Global approach to digital tax is still on track  CityNews VancouverBIARRITZ, France — A global attempt by more than 120 countries to find a way to more fairly tax global internet giants is moving ahead despite individual ...
10 salary components that can help employees reduce tax burden  Economic TimesYour salary structure consists of several components which can help you reduce your tax burden. While some of these components are fully or partially taxable, ...
Amazon is under scrutiny for not paying federal income taxes. Here's how it got its tax burden down to less than $0.  Business InsiderAmazon recorded a net federal tax credit for 2017 and 2018 and the company has paid a low tax rate for years. Here's how it did it.
Angel tax: Not dead, merely deferred  The Financial ExpressIf the intention is to bring relief, then the February 2019 circular should be amended to state that loans and advances in the ordinary course of business should ...
Lawsuit: Ark Encounter Didn't Pay Its Fair Share of Taxes, Hurting Local Schools  PatheosThere's a local battle brewing in Grant County, Kentucky between Ark Encounter, the Grant County Board of Education, and the local government.
All tax letters, notices to carry identification numbers to be verifiable online from Oct 1, 2019  Economic TimesStarting October 1, 2019, all letters and notices from the income tax department will carry a computer-generated Document Identification Number (DIN) which will ...
Capital gains: For FPIs, new SEBI norm is a tax-free ‘gift’  BusinessLineRegulator lets them invest from Gujarat Gift city, which enjoys a 10-year tax holiday.
Trump Floats a Tax Cut, Then Calls It Unneeded and Not Imminent  BloombergPresident Donald Trump said “a lot of people” would like a cut in payroll taxes, but the White House isn't likely to immediately reduce that levy -- in part because ...
You might need to maintain tax returns records for seven years  LivemintIn today's digital age, income tax records can be maintained at little or no expense for long periods of time in a digital format. However, it is important to know the ...
Abolish income tax, hike FD interest, cut it on loans: Subramanian Swamy  Moneycontrol.comSwamy made the remarks when asked if the steps taken by Finance Minister Nirmala Sitharaman would revive the growth.
Jammu traders demand extension of deadline for filing income tax, GST returns  India TodayCity-based traders' body Monday demanded an extension of deadline for filing income tax and GST returns as internet and other communication channels are ...
Trump's banks won't tell court if they have his tax returns  CNNLawyers for Deutsche Bank and Capital One repeatedly refused Friday to tell an appellate court in New York whether the banks are in possession of President ...
Red Meat Could Be the Next Sin Tax After Sugar, Fitch Says  BloombergMeat could be a target for higher taxes given criticism of the industry's role in climate change, deforestation and animal cruelty, according to a report by Fitch ...
If monthly rent paid is below ₹50,000, there is no need to deduct tax at source  LivemintI live in a flat and the monthly rent is ₹36,000. My employer contributes ₹19,000 towards the rent and I bear the remaining. Should the employer deduct tax ...
Guest Editorial: The issues facing property tax reform  The SentinelFor years, if not decades, people have urged the Pennsylvania General Assembly to come up with a viable solution for relief from school property taxes that are ...
FMCG companies seek tax relief on dealer discounts to lift sales  Economic TimesFMCG industry has petitioned to remove GST on amount received by dealers as reimbursement against discounts.
India's tax rise for high earners may trigger fund flight: ex-RBI governor Bimal Jalan  MoneycontrolA former Reserve Bank of India (RBI) governor, Bimal Jalan, has warned that the higher income taxes the government introduced in its budget could lead to a ...
Govt’s New Direct Tax Code May Reduce I-T Burden, Simplify Filing Process  The Logical IndianIf the proposals of the Direct Tax Code are accepted the taxpayers will have more disposable income and will directly aid consumption within the economy.
Is federal carbon tax killing jobs? Experts say answer isn’t ‘black and white’  CityNews VancouverREGINA — The Saskatchewan government says the federal carbon tax is killing jobs, but experts and even the province's trade minister say it's not that easy to ...
'Woo Private Sector, Keep Corporate Tax At 10%'  BW BusinessworldToday, the private sector feels harassed. They, instead, need to be wooed. So many people are going abroad. Create incentives for them. Corporate taxes ...
Property assessments rise countywide, could affect property taxes  Journal TimesRACINE COUNTY — After the most recent round of property assessments, homeowners throughout the county have seen a rise in their property values.
ITR Filing 2019: 5 incomes you must not miss to report in your Income Tax Return for AY 2019-20  The Financial ExpressIt is advisable to be extra careful while filing income tax return this year as even a small mistake can result in the issue of a notice from the Income Tax ...
Whistleblower gives House Dems evidence of "inappropriate" conduct on Trump tax returns  SalonHouse Democrats say a federal employee has given them evidence of "inappropriate efforts" on Trump tax audit.
Have you filed your income tax return correctly? Find out  Economic TimesHere's a short quiz to help you understand if you are on the right track to file your income tax return.
ATO slugs Shell with $755m bill in fight against multinational tax avoidance  The GuardianExclusive: Senior official says pursuit of resources groups over offshore projects has brought forward tax revenue by a decade.
PCSO wants freedom from taxes, giving money to other agencies - Cai Ordinario  Business MirrorTHE Philippine Charity Sweepstakes Office (PCSO) is seeking exemption from paying taxes and the removal of its mandatory contributions to various agencies ...
Property tax bills coming up | News  www.ekathimerini.comThis year's property tax bills will be posted online on August 31 and they will be lower than in 2018.
HMRC targets GSK contractors in UK tax crackdown  Financial TimesUK pharma group GlaxoSmithKline has found itself at the centre of a tax crackdown after authorities accused nearly 1,500 of its self-employed contractors of ...
We can’t fund the progressive agenda by taxing the 1% alone  Vox.comThe tricky politics of taxing the 1%, the middle class, and everyone in between.
Motherson Sumi rating | Buy — Interest, tax expenses took toll on PAT  The Financial ExpressWe believe SMP has undertaken various measures to improve productivity, cost synergies and reduce wastage.
Trump Says He Can Order Capital Gains Tax Break Without Congress  BloombergPresident Donald Trump said he can cut taxes by indexing capital gains to inflation without congressional approval, a move the White House has been ...
Textile companies seek tax incentives, DBT for farmers  Economic TimesNEW DELHI: Indian textile and clothing industry players say one-third of their production capacity is lying idle due to sluggish exports, poor domestic demand, ...
These Portfolio Tracking Tools Will Also Prepare Your Crypto Taxes  Bitcoin NewsTax season is months away, which is why you need to start preparing for it now. Leave everything to the last minute and you'll only end up cursing your.
Deadline For Filing Income Tax Return (ITR) Is Just 9 Days Away: 10 Latest Details To Know  NDTV NewsThe last date for filing of income tax returns for assessment year 2019-20 (financial year 2018-19) is August 31, 2019. Last month, the government extended the ...
Don’t Ban Assault Weapons—Tax Them  The AtlanticThe nation is debating what to do about assault-style weapons, what gun-rights advocates like to call modern sporting rifles. Gun-rights champions argue that ...
Dare County faces challenges collecting occupancy taxes on short-term rentals  The Outer Banks VoiceAs the number of short-term vacation rentals listed with online lodging marketplaces continues to grow on the Outer Banks, some local officials are concerned ...
Julie Jason: Enrolled agents are another option for tax help  East Bay TimesThis year, it will be important to start the process of interacting with your tax professional early — perhaps even now. Why? Last year's tax-act changes caused ...
Trump sues over California law forcing candidates to turn over tax returns  CNNPresident Donald Trump sued California Tuesday challenging a state law that requires candidates for president to disclose income tax returns before they can ...
IRS Warnings to Bitcoin Traders Offer Clues to Coming Tax Guidance  CoinDeskThe Takeaway: The IRS' recent warning letters to 10,000 traders offer hints at what its forthcoming guidance on crypto taxes might say. While the letters are not ...
Radio host criticizes Dems using Bible to push taxes, economic policy  Fox NewsDemocrats shouldn't use Jesus to justify socialist economic policies and doing so cheapens the historic figure, radio host Mike Slater argued on Saturday.
Armed forces caught in pension tax trap  Financial TimesThousands of members of the UK armed forces have been trapped by a government pension reform aimed at restricting tax breaks for senior personnel but ...
Amazon is passing along costs of a new digital tax to thousands of French sellers  CNBCAmazon is raising seller fees for thousands of small and medium-sized businesses in France because of a new digital tax passed by the French government.
Arun Jaitley, the man who brought India under one-tax regime  India TodayFormer finance minister Arun Jaitley was the man at the forefront of reforms that formed the cornerstone of the first term of the Narendra Modi-led government.
Naresh Goyal created tax evading schemes to siphon off funds abroad: ED  Economic TimesThe Enforcement Directorate on Saturday alleged Jet Airways founder Naresh Goyal "structured" a number of tax evading schemes and siphoned off huge funds ...
IMF raises doubts about Indias tax revenue estimates, GDP growth target  Business StandardThe International Monetary Fund (IMF) has posed questions for policymakers in India over steep tax revenue collection estimates for 2019-20 and the ...
Tax notices to soon carry an identification number  LivemintDIN is likely to improve transparency and bring down the processing time of notices.DIN won't be limited to new tax notices. It will also be issued to all the ...
ITR filing: TDS related queries answered by income tax department  Economic TimesAt the time of filing your income tax return (ITR) it is important to ensure that all TDS-related details are correctly filed in the form. Consequently, questions ...
How to show your trading and F&O income in the tax returns?  BusinessLineBL Research BureauFor traders, aside from predicting the stock market, reporting income from intra-day trading or Futures & Options (F&O) in the tax ...
Retain tax sops for genuine R&D  Economic TimesEven as the Direct Tax Code's call to prune tax exemptions is unexceptionable, it would be sensible to retain those for research and development (R&D).
IRS begins tax clampdown on unreported cryptocurrency profits  ZDNetIf you've been trading but not declaring, the tax *service* might be on your case.

2005 Ford Escape Hybrid Certified For Clean-Fuel Deduction

If you are environmentally conscious and purchase a 2005 Ford... Read More

Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004?

Someone once remarked, "Next to being shot at and missed,... Read More

Gambling Income and Expenses - Tax Requirements

Hit a big one? With more and more gambling establishments,... Read More

Access to E-records by Taxing Authorities: A Case for Pakistan (Part I)

Background issues of access to recordsTo assess the records at... Read More

Need a Copy of Your Tax Return Information?

Taxpayers have two easy and convenient options for getting copies... Read More

About Income Taxes; Tidbits

1812The first attempt to impose an income tax on America... Read More

The Seven Deadly Tax Sins: Commonly Missed Deductions

It's that time again, the April 15 tax deadline is... Read More

Furnishing Evidence in E-Tax Compliance

Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This... Read More

Seven Key Tax Deductions for the Self Employed

As a sole proprietor, it's wise to familiarize yourself with... Read More

Small Businesses: Company Car Vs. Personal Mileage Reimbursement In Hurricane Katrinas Wake

With gas prices at an all time high before Hurricane... Read More

Back To School ? Educators Deduct School Expenses

As teachers and students head back to school following a... Read More

Get Uncle Sam To Pay $36,000 For Your Childs Education!

Let's assume that you would like to begin saving for... Read More

Small Business Tax Credit - Americans with Disabilities Act

Many small businesses complain when confronted with the expense of... Read More

Donating Cars To Charity - New Tax Rules

On June 3, 2005, the IRS released guidance on charitable... Read More

Employment Taxes ? What Are They?

If you have employees, you are responsible for paying a... Read More

Tax Trap #3 -- IRS Penalties, Interest and Love Letters

As a small business owner or self-employed person, one of... Read More

Tax Tips to Save Money on Taxes - Get the Corporate Kick and Save Loads of Money

Why a Corporation Helps Save You TaxesThe Tax Rates (Notice... Read More

Complaince of Tax Return in Electronic Commerce Taxation

Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More

Fiscal Deity: Tax Consultant

Strategic planning throughout the year results in a minimal tax... Read More

Tax Reform, My Way

We need real tax reform and we need it now.... Read More

IRS Lock-In Letters ? What?s An Employer To Do?

Employers often ask employees to designate the amount of tax... Read More

Tax Time Tune Up

Excerpted from the new book, "How to Do Space Age... Read More

Taxing Overseas Firms for SOX Compliance

The Sarbanes-Oxley Act, also called the Public Company Accounting Reform... Read More

How To Set Up A Tax-Saving Bookkeeping System

One of the most important, but least understood or appreciated... Read More

What the Tax Software Companies Dont Want You to Know

Haven't done your taxes yet? No problem. Now there is... Read More