Bookkeeping Tips - Employees
Don't assume former employees who return part-time are independent contractors. Do not base worker status on length of service. A worker who fits the definition of "employee" is an employee and all employment taxes apply even if the person works for only a few hours on only one day.
Do withhold FICA on part-timers, including retirees. Even if someone works for you part-time and also has a full time job where they have had 100% of their FICA withheld for the year, you must withhold the full amount of FICA from their pay. These individuals can obtain a refund of any overpaid FICA on their Form 1040. Similarly, if a retiree is receiving Social Security benefits and works for you just one day a week, you must withhold FICA.
Do not assume you must give benefits to part-timers, or summer help or those that are hired seasonally or for holidays. Nor are you required to include temps and part timers in health, pension and other benefits. However, if you exclude them, have a written plan stating which benefits are not available to these workers.
WHO ARE EMPLOYEES?
Generally, employees are defined either under common law or under statutes for certain situations. See the IRS Publication 15-A for details on statutory employees and nonemployees.
Employee status under common law. Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.
Generally, people in business for themselves are not employees. For example, doctors, lawyers, veterinarians, construction workers, and others in an independent trade in which they offer their services to the public are usually not employees. However, if the business is incorporated, corporate officers who work in the business are employees.
If an employer-employee relationship exists, it does not matter what it is called. The employee may be called an agent or independent contractor. It does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. If an employer-employee relationship exists, the individual is an employee.
ILLEGAL ALIENS SEEKING EMPLOYMENT
The IRS has certain filing requirements.
Illegal aliens can obtain an IRS assigned tax identification number known as the ITIN which can be obtained using form W-7 in lieu of a Social Security Number
Always do a TIN matching (name, address and social security number of the individual against IRS records) when hiring someone to work for you. Social Security Numbers are often sold to illegal aliens who are not aware of the laws in the United States. You can do a TIN matching by registering with the IRS and using the IRS website.
I can also perform this service for you.