Tag Archive self employment

Employers (Dental Practices) Engaging Independent Contractors are Prone to Scrutiny

The government acts strictly with employers who make attempts at evading taxes by resorting to unscrupulous means.  Many employers project their permanent employees as being independent contractors in order to avoid employment tax.

Hiring independent contractors is legal in certain businesses and professions, provided the conditions allowing for the same are adequately satisfied.  Dentistry also falls under the same purview. The government is liable to identify and arrest any practice by an employer wherein he manipulates or misuses this provision of law with an intention of avoiding employment tax.

To be considered as an independent contractor, one needs to fulfill certain conditions, so that status as an independent contractor can be defended in the court of law if the need arises.  The conditions which validates a person as a contractor require include the ability of the person to work freely in the premises of the owner, is liable to be paid by the owner for the project based on any frequency other than on an hourly basis, the person uses his own appurtenances, recruits and pays for his own employees, and has a control on the final product of the service he is giving.

The person who doesn’t fulfill the stated criteria cannot be validated as an independent contractor.  Let’s consider a case of a dental specialist. He doesn’t practice on his own as an individual practitioner but work in the facility owned by some other practitioner. He is compensated for his services separately from the regular employees of the facility owner, He comes with his own team – which does not fall under the owner’s supervision – and is totally responsible for the quality of the services he provides.

The owner cannot supervise his work and operates as a business entity; thus his company has signed a contract with the owner’s entity for delivering a certain service for a particular period.  The way the workers connect to the owner’s facility in terms of financial and business relations is what decides the exact status of the worker.

The owner who wrongly classifies an employee as an independent contractor can be assessed for social security and medicare tax attributed to the employer. The owner can also be held responsible for the employee portion of Medicare and social security taxes.

The owner can also be additionally penalized for not covering the wrongly classified employee under any benefit plans like health and retirement. An independent contractor is a self employed individual, and has certain tax obligations to be met, which are listed on the IRS website’s Self Employed Tax Centre page.

Any worker that does not fulfill the criteria required of an independent contractor will be deemed as being wrongly classified by the employer. Even an associate uses the employer’s resources and his work is dirigible by the employer, keeping him out of the purview of being an independent contractor.

In case of any discrepancies are proved related to the same, the onus of taking the beating would fall on the owner. There have been cases where larger firms have been penalized for classifying an employee as an independent contractor due to the inconsistencies being discovered in their terms of employment by the IRS. Such owners had been forced to pay the payroll taxes and related penalties.

 

 

 

Understanding Self Employment Tax

The word tax never fails to not to scare us right? No matter however much money we are paying to the government as tax it seems that when ever it’s time to pay back to the government there is some shiver that goes down the spine. But much of the fear is allayed when the necessary taxes are deducted from the salary itself and you don’t have to bother much about paying them yourself. But when the case is otherwise and you have to yourself tell the government about your earnings and then pay the relevant taxes, it becomes a bit scary then. So definitely it not only sounds scary but quite draining as well.

How Does One Go About Paying The Self Employment Taxes?

If you are self employed and you do not draw monthly cheques under a company then you have to individually make arrangements for getting your taxes paid. This may sound tough but as you systematize and organize the important documents, the task of you paying your taxes is not that difficult anymore.  What is important is knowing when to pay them

If you are self employed then such taxes may be paid throughout the year. If you are making a good living out of your self employed incomes or earnings, which is again registered as your primary income then probably you have pay the scary taxes. Also you can only skip the quarterly taxes at the risk of paying heavy fines during tax paying time.

As a self employed individual one has to also pay social security and medicare to the government out of their incomes. The best thing to allay your self paying tax fears is to stash away those essential bucks to be used only during tax time.

Not all is bad for self employed persons!

Yes in such cases you may have to pay only half of the entire tax burden. Also you are liable to face deductions if you are using your home office, other business expenses or purchasing your own health insurance schemes. The only thing that ought to be kept in mind here is keeping all the papers ready for audit time.

If all the above is little complicated for you then you better consult an attorney to secure legal advice.