For today’s blog posting, I thought a cactus flower might be appropriate as this is certainly a prickly subject matter. Read on . .
I had the pleasure of attending the Georgia Government Finance Officers’ Association (GGFOA) Annual Conference at Lake Lanier last week (kudos to Lori Sayer, Finance Director for Morgan County, Georgia, who chaired the conference committee; well done and we’re so proud that you and Morgan County are members of the OpenRDA family). One of the many sessions that I was interested in was an Employment Tax Seminar on Independent Contractor vs Employee. It was to be presented by Cynthia Angie Sanderlin with the IRS, but because of the federal government shutdown, she couldn’t attend and the session was canceled. What I’m sharing below is based on the planned presentation materials, IRS-Guidewires, etc.
Over the weekend, I revised and republished an RDA News Article that I wrote in June, 2012, that pertained to election (poll) workers (the calendar year exclusion increased for 2013 from $1500 to $1600 and some of the links needed to be updated as well). In addition to election workers, another type of worker that you might be paying as an independent contractor (1099) instead of a common-law employee is volunteer fireman. You can request that the IRS make a determination by filing Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding), but know that a ruling/determination can take up to 6 months. Of course, if paid as common-law employee, FICA and Medicare would be withheld (along with matching amounts) and the volunteer fireman would receive a W2. If the IRS audits your organization and finds that a worker should be considered an employee and not an independent contractor, you’re subject to penalties and interest as well as retroactive payroll taxes. So, you might be interested in an IRS program, Voluntary Classification Settlement. It provides an organization an opportunity to voluntarily reclassify workers as employees for future tax periods with limited federal employment tax liability for past non-employee treatment. For more information on the VCSP, see Announcement 2012-45 in Internal Internal Revenue Bulletin 2012-51 (VCSP uses Form 8952). You may also want to review Publication 1779 (Independent Contractor versus Employee).
Of course, with the federal government shutdown, audits are suspended. But, that also means delays with processing Form SS-8 and Form 8952.