From the course: Finance Foundations: Income Taxes
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Common tax issues for small businesses, part 2
From the course: Finance Foundations: Income Taxes
Common tax issues for small businesses, part 2
- The fourth common small business tax issue relates to distinguishing between employees and independent contractors. and independent contractors. According to the IRS in the United States, an employee an employee is a person who performs work is a person who performs work that is controlled that is controlled anddirected by the employer. and directed by the employer. It is considered tax evasion when one falsely classifies when one falsely classifies a controlled a controlled and directed employee as an outside, and directed employee as anoutside, independent contractor. independent contractor. Now, one reason an unethical employer does this does this misclassification misclassification is to avoid paying payroll taxes. is to avoid paying payroll taxes. An easy way to get into big trouble with the taxing with the taxing authorities authorities is to fail to properly pay payroll taxes. is to fail to properly pay payroll taxes. The possible penalties for going down that road are are…
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