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  Tax Exemption Home: Non Profit / Exemption Information: Exemption Workshop - Chapter 6 - Employment Issues
 

Exemption Workshop - Chapter 6 - Employment Issues

Employment Taxes

Exempt organization, on average, pay and withhold taxes on federal employment using similar rules that other entities use. Taxes for federal employment exist beneath FUTA or Federal Unemployment Tax Act, FICA or Federal Insurance Contributions Act, and income tax withholding. If 501(c)(3) organizations have employees, they are still required to withhold, deposit and pay the employment tax, with the addition of federal income tax withholdings, including Medicare (FICA) and Social Security taxes, just as any other employer would. Compensation of $100 or less paid to an employee of an exempt organization for the calendar year is not subjected to the FICA tax.

Unlike other exempt organizations that are required to pay FUTA or federal unemployment taxes, organizations that are section 501(c)(3) are not required to pay FUTA or federal unemployment tax. Those that do not pay and withhold employment tax may be penalized.

Worker Status: Independent Contractor or Employee
Employers are required to pay and withhold federal employment taxes on all wages paid to any employee.

Worker Status: Independent Contractor or Employee
However, employers generally don't have to pay or withhold any taxes on payments made to independent contractors. If an organization does not correctly classify an employee as an independent contractor, it may be responsible to pay for that worker's employment tax. Understanding worker classification is, therefore, vital to correctly fulfilling an entity's legal duties for information reporting and withholding regarding its workers.

Employee Definition

In regards to federal tax purposes, a worker is defined as an "employee" if the employer is given the authority or right to control and direct the worker in regards to the means and manner of the job performance of the worker. This means that employers have the right to tell employees what to do and how to do it. Even if this is not exercised, the right of the employer to have control is most important.

Definition of Independent Contractor
An independent contractor is one who carries on an independent business or trade, while being self-employed. Compared to employees, entities have fewer rights in regards to directing or instructing Independent contractors. Profit or loss is a real possibility of the independent contractor. Business losses are not usually incurred by employees receiving a salary.

Worker Classification: Evidence in Three Categories
The worker and the entity relationship determine the classification of the worker. Three categories have been developed by the IRS as evidence in determining the difference between a worker who is an independent contractor and a worker who is an employee. In any relationship, it's necessary to point out that employee status is favored by some facts and independent contractor status is favored by other facts. Evidence for the right to control and for autonomy must be considered to determine correctly.

3 particular categories with this evidence are:
• Behavioral control
• Financial control
• The parties' relationship

Behavioral Control
Several factors that reveal the right to control or direct how a worker does the tasks are as follows:
• Training – While independent contractors have their own particular methods of work, the employee is trained in a specific way to do certain services, also
• Instructions – An employee follows the instructions of the organization involving sequence or order, how, where and when exactly to perform the work; as well as the equipment and tools to be used, etc.,

Financial Control
Factors that reveal the right to control or direct the worker's financial activities are as follows:
• Profit or Loss Opportunity – Profit or loss is the decision of the independent contractor.
• Payment Method – Work done by independent contractors is usually paid for by a flat fee while typical employees are paid expected wages per hour, week or other stipulated time frames.
• Offering Services to the Related Market – The independent contractor who is searching for opportunities to increase his business often maintains and advertises the marked location of his business.
•Investments that are Considerable – Considerable investments that an independent contractor has are separate facilities for an office or workplace in which services are performed for clients, as well as equipment and/or tools owned and used for the particular profession or trade.
• Expenses that are not reimbursed – Employees are less likely to have the reoccurring and unreimbursed business expenses that an independent contractor acquires. The worker may also be involved in hiring and paying workers.

Relationship of the Parties
Relationship perspectives between parties reveal the following factors--
• Normal Business Activity – An employee-employer relationship is signified if services are a major aspect of the entity's regular and normal business.
• Termination or Discharge – Employee status is determined if the business can discharge or terminate a worker or if a worker who is under an agreement or contract can be held liable if the worker leaves before completing a job. Employee status is posed by these facts.
• Benefits for Employees – Evidence of employee status are usual benefits provided for employees such as a pension plan or health insurance.
• Contracts that are Written or Purposed and Committed Activities of the Parties – Written Contracts or Committed Activity that is agreed on among the Parties and that identifies that status of the independent contractor or employee status is crucial evidence. The whole matter of this relationship, however, must be taken into consideration.
Publications explaining classification of workers and answering employment related questions are offered free from the IRS and are as follows--
• Publication 15, (Circular E), Tax Guide for Employers
• Publication 15-A, Supplemental Tax Guide for Employers
• Publication 1779, Independent Contractor or Employee

If an organization has questions regarding the determination of an employee for the purposes of federal employment taxes and tax withholding on income, an organization is urged to fill out IRS forms SS-8 or Determination of Employee Work Status for Purposes of Federal Employment Tax and Income Tax Withholding. Instructions that accompany the form will explain where the form should be filed. For further assistance with classification of employ, organizations may wish to seek the help of an attorney, accountant or with an IRS representative.

State Requirements or Other Federal Classification Requirements
Various state or federal agencies determine classification of employees based on the individual case involved and the facts and laws relating to them; governmental agencies by state may not be the same as IRS conclusions. Thus, exempt organizations should consult both the state and the IRS for clarification on rules regarding the employment of independent contractors.

Employees and Non-Employees – Defined by Statute
Independent contractors or employees are classified in positions by statue and are as follows—
Corporate Officers: These employees are officers of corporations and are only classified as employees unless they perform little to no service; neither type can receive nor be entitled to receive direct or indirect compensation.
Offices such as presidents, vice-presidents and treasurers define corporate officers, even in the event of-
• The particular officer is in charge of his or her compensation and responsibilities, being the sole shareholder, or
• A leasing company may supply the officer.
Corporate Director: One who directs a corporation in his or her capability and as such is recognized as an independent contractor.

Payment of Compensation
Many requirements in regards to compensation payments must be considered once the organization has correctly concluded the correct classification of all its workers. Outlined below is more information regarding the requirements and issues of importance concerning the IRS and the SSA, or the Social Security Administration (SSA).
How to Register for a Federal ID Number
The EIN or the employer identification number is mandatory for organizations that must report employment taxes or who produce tax statements for its employees. The EIN needs to be used on all paperwork that is sent to the IRS or SSA, as it serves to help identify tax accounts of employers and certain entities without employees. The EIN is dispensed by the IRS and consists of nine digits which are arranged as—xx-xxxxxxx.

To obtain an EIN, organizations must complete Form SS-4, Application for Employer Identification Number. Applying for an EIN can be done online at http://www.IRS.gov, or through the telephone or mail by following information that comes with Form SS-4.

Once the application is submitted online, the organization will promptly receive their EIN. Organizations will then receive a copy of their EIN in the mail to the address listed on their application.

Federal Forms Completed by Employees
These forms are filled out by employees and held by their employers--
• Form I-9 or Employment Eligibility Verification
• Form W-4 or Certificate of Employee's Withholding Allowance
• Form W-5 or Certificate of Earned Income Credit Advance Payment

Form I-9, Verification of Employment Eligibility
Any employer who hired any employees (no matter how many were hired) after November 6, 1985 are required by the federal Immigration and Nationality Act (8 U.S. Code section 1356 et seq.) to certify that they are authorized according to the law to work in the United States of America. This Act also makes it unlawful for employers to willfully hire those who are not legally allowed to be employed in the United States.

The USCIS, or the United States Citizenship and Immigration Services provides Form I-9, which verifies the eligibility of employment.

According to the law, employers are required to make sure that all employees complete Section 1 of Form I-9 commencing employment. Employees who are new are required, within 3 days of being hired, to complete Section 2 of this form. According to this law, employers are required to inspect documentation that establishes their employee's work eligibility and identity. Form I-9 gives a complete list of necessary documents needed to verify all the requirements.

Employers should not refuse to hire a person solely based on the person's citizenship status or on their national origin if they are indeed given authorization to legally work in the United States. Inquiring into the applicant's origin or if he or she is an American citizen should be avoided by the employer because these questions could be considered intrusive and discriminatory. However, employers can inquire of a perspective employee if he or she is indeed allowed by law to work in the U.S.

For more information regarding the laws of the USCIS, Publication M-274, Handbook for Employers can be obtained from the website of the Citizenship and Immigration Services, which is http://uscis.gov.

Form W-4, Withholding Allowance Certificate of Employees
W-4 must be completed before work is begun by all new employees and must be effective by their first date of pay. Employers can correctly figure each employee's income tax withholding rate with the guidance of Form W-4. New employees who do not complete Form W-4, his or her status should be assumed as single with zero withholding allowances.

Until an employee submits a new Form W-4, it will stay in effect; however, employees must complete a new Form W-4 annually by February 15th if they claim exemption from withholding. IRS Publication 15, (Circular E), Employer's Tax Guide gives information regarding the effective date for a replacement Form W-4.

Copies of Forms W-4 are required to be submitted to the IRS when the employee:
• Claims 10 or more withholding allowances, or
• Along with claiming an exemption from withholding, the employee's wages normally exceed $200 per week.
Form 941 should be sent to the IRS along with any copies of Forms W-4 that are received during the quarter from employees who remain employed at the end of that quarter (see below). Boxes 8 and 10 on any Form W-4 that is sent to the IRS must be completed by the employer. Employers must complete boxes 8 and 10 on any Form W-4 sent to the IRS. Publication 15 (Circular E), Employer's Tax Guide can give detailed information regarding the Form W-4.

Form W-5, Earned Income Credit Advance Payment Certificate
EIC or Earned Income Credit for eligible employees can be received with their pay during the year. In order to be eligible for an advance on EIC payments, employees must have a qualifying child who lives with them. In order to show eligibility requirements, the Earned Income Credit Advance Payment Certificate or Form W-5 must be completed by employees who desire to receive these advanced EIC payments.

Federal Forms for Independent Contractors
The following forms must be completed by organizations that use independent contractors--
• Form W-9, Request for Taxpayer Identification Number and Certification and
• Form 1099-MISC, Miscellaneous Income

Form W-9, Request for Taxpayer Identification Number and Certification
In order to obtain particular certifications and claims for exemption from a corporation, partnership or person in the United States (to include a resident alien), and to obtain a TIN or the taxpayer identification number, Form W-9, Request for Taxpayer Identification Number and Certification should be used.

This form should not be sent to the IRS, but should be permanently held by the Organization.
Reporting Non-Employee Payments on Form 1099-MISC
When reporting an income of $600 or more for independent contractors, Form 1099-MISC, Miscellaneous Income, should be used by Organizations. This income should include fees, salaries, commissions, wages, prizes, and awards for services that were performed by the nonemployee.
It is not required for the most part, to report payments made to a for-profit corporation on Form 1099-MISC. However, when reporting payments of $600 or more that were designated for the purpose of health care or medical services provided by a corporation or a professional corporation provided, Form 1099 MISC must be used by employers.

For all payments that were made in the previous calendar year, Forms 1099-MISC must be filed with the IRS by February 28th (or March 31st when filing electronically) while payees must receive the Forms 1099-MISC by January 31st for all payments made in the prior calendar year. The IRS uses Form 1096, Annual Summary and Transmittal of U.S. Information Returns to transmit paper Forms 1099-MISC.

Penalties in Failing to Furnish Form 1099-MISC
Penalties for Failing to file a correct Form 1099-MISC by the due date with the IRS and without a reasonable cause. Causes for penalizing Organizations--
• If the Organization fails to file on time
• If the Organization fails to include all information that is required to be completed on Form 1099-MISC, or
• If the Organization includes incorrect information on the form
Unless the corrections are done in a timely way, the charge of the penalty is usually $50 per document.
More penalties will result if the Form 1099-MISC to the payee is incorrect and there is no reasonable cause. Causes for penalizing Organizations--
• If the Organization fails to meet the deadline of January 31st in providing the payee with the statement
• If the Organizations fails to include all information that is required to be completed on the statement, or
• If the Organization includes incorrect information on the statement
Penalties can average $50 per statement to a maximum of $100,000 per year, despite when the time the corrected statement was received by the IRS.

Withholding Federal Taxes
The employee's W-4 determines the amount of federal income tax to be withheld. To correctly establish the amount of federal income tax that should be withheld, Publication 15, Circular E Employers Tax Guide can offer guidance.

Both employee and employer pay Medicare and Social Security taxes. It is the responsibility of the employer to both withhold the employee's part of the taxes owed and to pay the matching amount.
From each employee's wages is a 6.2% Social Security tax rate while the employer provides a matching 6.2% resulting in a 12.4% total for employees. In regards to wages that were paid in the year of 2008, taxes are withheld and paid up till the wages of the employee exceeds $102,000.

The percent of Medicare taxes withheld from each employee's wages are 1.45% along with a matching 1.45% from the employer, totaling 2.9% for employees. There is limit set on wages subject to Medicare, unlike the Social Security tax.

Backup Withholding
When a payee does not give his or her correct TIN or the taxpayer identification number, 28% of nonemployee compensation payments must be withheld by employers. Organizations may be required to backup withholdings for any reason if the IRS or the state government tax agency requests this. Employee's wages are not affected by backup withholding.

Depositing Federal Taxes
With the use of the EFTPS, or the Electronic Federal Tax Payment System, employers may deposit federal employment taxes, or can mail or deliver cash, a check or money order to any authorized financial institution. EFTPS are mandated forms to be used by certain employers.

Filing Federal Employment Tax Returns
Most organizations must use the proceeding forms or returns--
• Form 940, FUTA or the Employer's Annual Federal Unemployment Tax Return
• Form 941, Employer's Quarterly Federal Tax Return
• Form 944, Employer's Annual Federal Tax Return
• Form 945, Annual Return of Withheld Federal Income Tax (referring to backup withholding and payments that are non-payroll)
• Form W-2, Wage and Tax Statement
• Form W-3, Transmittal of Wage and Tax Statements
• Form 5500, Annual Return/Report of Employee Benefit Plan
For facts in determining which schedule to use for making deposits, organizations should refer to Publication 15, Circular E - Employer's Tax Guide; as well as referring to the general instructions that accompany the required forms or returns.

Form 940, (FUTA) or the Employer's Annual Federal Unemployment Tax
Unemployment compensation for jobless workers can receive payments from the State unemployment systems, together with (FUTA) or The Federal Unemployment Tax Act. Organizations that are section 501(c)(3) are not subject to (FUTA) tax on the wages of their employees, but other tax-exempt organizations, however, are subject to (FUTA). (FUTA) tax is only paid by the employer and is not deducted from the wages of employees.

Both state and federal unemployment tax is paid by generally all employers. Form 940 is employed for reporting federal unemployment tax. The due date for this return regarding wages paid for the previous calendar year is January 31st. However, for employers who deposited the entire FUTA tax on time, filing may be completed on or before February 10th.

An example of the FUTA tax is as follows—Those who are subject to the FUTA tax for wages paid to employees in the year 2008 are employers who had one or more employees for part of a day in 20 or more various weeks during 2007 or 2008, or if the employer paid wages of $1,500 or more to employees during any calendar quarter for the years of 2007 or 2008. The FUTA tax is only applicable to the initial wages of $7,000 that an employee receives during a calendar year.

Form 941, Employer's Quarterly Federal Tax Return
Form 941, or the Employer's Quarterly Federal Tax Return, must be filed each quarter by employers who pay wages that are subject to income tax withholdings, social security and Medicare taxes, with the exception of employers who are required to file Form 944 or have a valid exception. At the end of each quarter, Form 941 must be filed by the last day of the month of that quarter.

Form 944, Employer's Annual Federal Tax Return
Form 944 or the Employer's Annual Federal Tax Return can be filed in place of Form 941 if the qualifying employer is notified of his status. Employers filing Form 944 must file by January 31st following the conclusion of the calendar year. For organizations that pay the taxes in full by the due date, they receive an extra ten days.

Form 944 Filing Requirements and Exceptions to Forms 941
In regards to the filing regulations for Forms 944 and 941, the proceeding exceptions apply--
• Seasonal businesses, i.e. summer recreational camps, which do not have tax liability or have not paid wages, are not required to file quarterly. The preparer of Form 941 should check the box on line 17 marked "Seasonal employer" so that the IRS is notified that such an organization is not required to file a return in a particular quarter or quarters during the year.
• Agricultural employers should complete Form 943 or the Employer's Annual Tax Return for Agricultural Employees.
• Income tax withholding on backup withholding and non-payroll items and backup withholding are required to be reported on Form 945 or the Annual Return of Withheld Income Tax.

Form 945, Annual Return of Withheld Federal Income Tax
Employers are advised to complete Form 945, or the Annual Return of Withheld Federal Income Tax, in regards to reporting federal income tax that has been withheld from non-payroll payments i.e. backup withholding, IRA distributions, annuities and pensions. For more details, organizations are advised to contact the local state tax department on state withholding and reporting stipulations.

The deadline for filing Form 945 is January 31 of the preceding calendar year when the reportable payments were made.

Penalties:
Form 940, Form 941, Form 944
Form 945
There are penalties for:
• Late deposits
• Insufficient deposits
• Failure to deposit using the EFTPS (when it's required)
• Late filing without proof for a reasonable cause. An explanation for a late filing must be attached to the return.
• Filing False or fraudulent returns, refusing to file or failing to pay tax will result in penalties.

Form W-2, Wage and Tax Statement
Form W-2 is to be used by employers when reporting wages that were paid to each employee. These reports are used by the SSA, or the Social Security Administration to compute benefits of employees upon their disability, retirement or for the deceased employee's family survivor benefits. Eligibility for Medicare is also determined by the employee's earnings.

These reports are used by the IRS in confirming that the FICA taxes paid by employers are correctly credited to Medicare and Social Security programs, as well as to enforce the income tax laws.

Form W-2 must be filed by employers on the wages that are paid to every employee from whom--
• Medicare, social security or income tax was withheld, or
• Income tax from employees that would have been withheld if the employee had not claimed exemption from withholding or if the employee had claimed not more than one withholding allowance on Form W-4, the Employee's Withholding Allowance Certificate.

Employers are required to--
• File a Copy A of Form W-2 with the Social Security Administration which is due on February 28 (or, if filing electronically, by March 31st)
• Transmit Copy A of Form W-2, using Form W-3
• If required, file 250 or more Forms W-2, electronically unless a waiver is granted by the IRS, and
• Furnish to the employees by January 31st, Copies B, C, and 2 of Form W-2

A final return must be filed by an organization that terminates or ceases to pay wages to an employee.
Penalties for Failing to Submit Form W-2.

Penalties averaging $50 for each document may be charged for employers failing to file a correct Form W-2 by the due date without proof for a reasonable cause, unless the documents are corrected within the time allowance that was stipulated.

Penalties for Failing to Submit Form W-2 (continued)
Organizations will be penalized for the following reasons--
• Failing to file on time
• Failing to include all the information that must be shown on Form W-2
• Incorrect information on Form W-2
• Filing on paper when required to file electronically
• Incorrectly reported the TIN
• Failing to report the TIN
If an organization has issues or topics that are unresolved, to avoid delays in the filing process and to insure that the return is made in a timely and accurate way, the organization should attempt to make direct communication with the IRS through contact with their third party designee (the tax preparer or employer) to review the form by checking the designated box on Forms 940, 941, 944 or 945.
An employer may be subject to a penalty if he or she provides the employee with the incorrect payee statements (Form W-2) without a reasonable cause. These penalties may apply if the employer--
• Does not provide the statement by January 31st
• Does not include the all required and complete information on the statement or
• Includes information on the statement that is incorrect
Penalties can average from $50 per statement on up to a yearly maximum of $100,000, regardless of the when a corrected statement was submitted.

Form 5500, Annual Return/Report of Employee Benefit Plan
For reporting on the information regarding employee benefit plans, Form 5500, Annual Return/Report of Employee Benefit Plan is to be used. Information about each employee benefit plan that is subject to the ERISA must be filed annually by its sponsor or administrator.

In an effort to decrease the filing burden for plan administrators and employers, the IRS, Pension Benefit Guaranty Corporation and the Department of Labor (DOL) have combined certain returns and report forms. Administrators and employers who adhere to the instructions regarding Form 5500 will normally suffice the annual reporting requirements for the IRS and DOL.

The due date that employers must file all the necessary schedules and forms with the Employee Benefits Security Administration is no later than the last day of the 7th month after the end of the plan year. The due date of July 31st is for a calendar year plan.

Penalties:
Form 5500
If incomplete information is given or if returns or statements have not been filed, the Employee Retirement Income Security Act of 1974 (ERISA) and the Code have stipulated the IRS and the DOL to regulate penalties. If 5500 filing requirements have not been met, various penalties under the ERISA and the Code may be imposed, including--
• A penalty ranging on up to $1,100 per day for each day that a plan administrator refuses or fails to file a complete report
• A penalty of $25 per day (on up to $15,000) for not filing returns for bond purchase plans, annuities and trusts, and certain plans of deferred compensations by the deadline due date.
• A penalty of $1 per day (on up to $5,000) for each party that fails to file the required registration statement
• A penalty of $1,000 for failing to file an actuarial statement

Income Tax Records that must be Retained for Employees
Exempt organizations are encouraged to keep complete and factual records for taxes paid for each employee, to include Medicare and Social Security taxes, income tax and Federal Unemployment (FUTA) Tax. Employers must retain all of these records for 4 years.

Below are examples of the various income tax records that should be retained--
• The name, address, and Social Security number of each employee
• Dates and amount totals of wages paid, along with the duration of time in which the payment was made
• The amounts of each wage payment that was liable to withholding
• The date and amount of withholding tax collected on each payment
• An explanation for differences in the taxable amount if less than the total payment
• Copies of statements from employees concerning a residence or physical presence in a foreign country, residence in the Virgin Islands or in Puerto Rico, or nonresident alien status
• Dates of payments for noncash compensations and its fair market value
• Information concerning health or accident plans and the amount of each payment
• Each employee's withholding allowance certificates (Forms W-4) that he or she filed
• Employee and employer agreements regarding voluntary withholding of additional amounts of tax on Form W-4

Income Tax Records that must be Retained for Employees (continued)
• When necessary in calculating tax liability, payments made to employees, as well as dates for each calendar quarter when an employee worked for you outside the course of your trade or business
• Unless the information on these statements is present in another item on this list, copies of employee statements reporting tips that were received
• Requests by employees, as well as any notices for revoking their request to have their withheld tax calculated on the basis of their individual cumulative wages
• The dates and amounts of the advance payments included with Forms W-5, Earned Income Credit Advance Payment Certificate
Records of Social Security and Medicare Taxes to be Retained for Employees
Below are shown examples of various Medicare tax and Social Security records that employers should retain--
• An explanation for any contrast between the taxable amount and the total wage payment
• The date and amount collected for each Medicare and Social Security tax payment
• The sum of each wage payment liable to Medicare tax
• The sum of each wage payment that is liable to Social Security tax
(FUTA) or Federal Unemployment Tax Records to Retain for Employees
Following are examples of various FUTA records that employers should retain--
• Other information that may be required on Form 940 (or Form 940-EZ)
• The sum that was paid to the state unemployment fund
• An explanation for any contrast between the sum of the total compensation and the sum of the total compensation subject to the unemployment
• The sum amount of payment made to employees for the calendar year

Other Federal Agencies

For more information from other federal agencies that regulate employment issues, their contact information is below--
Social Security Administration (SSA)
Telephone: 1-800-772-1213
Website: www.ssa.gov
U. S. Department of Labor (DOL)
Telephone: 1-866-4-USA-DOL
Website: www.dol.gov
U.S. Citizenship and Immigration Services
Telephone: 1-800-375-5283
Website: www.uscis.gov
For More Information
Circular E - Employer's Tax Guide, Publication 15
Employer's Supplemental Tax Guide, Publication 15-A
Tax Withholding and Estimated Tax, Publication 505
Tax Calendars, Publication 509
Reporting Tip Income, Publication 531
How Do I Adjust My Tax Withholding? Publication 919
Now a Full Range of Electronic Choices to Pay All Your Federal Taxes, Publication 966
Employee's Daily Record and Report of Tips to Employer, Publication 1244
Independent Contractor or Employee, Publication 1779
Tips on Tips: A Guide to Tip Income Reporting for Employer, Publication 3144
Tips on Tips: A Guide to Tip Income Reporting for Employees, Publication 3148
Chapter 6 – Employment Issues
Page 6-21
Application for Employer Identification Number, Form SS-4
Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, Form SS-8
Wage and Tax Statement, Form W-2
Transmittal of Wage and Tax Statements, Form W-3
Employee's Withholding Allowance Certificate, Form W-4
Earned Income Credit Advance Payment Certificate, Form W-5
Request for Taxpayer Identification Number and Certification, Form W-9
Employer's Annual Federal Unemployment (FUTA) Tax Return, Form 940
Employer's Quarterly Federal Tax Return, Form 941
Employer's Annual Federal Tax Return, Form 944
Annual Return of Withheld Federal Income Tax, Form 945
Annual Summary and Transmittal of US Information Returns, Form 1096
Miscellaneous Income, Form 1099-MISC
Publications and Forms
Publications and Forms can be downloaded by visiting www.IRS.gov or by calling the IRS at (800) 829-3676 or by downloading them from

Employment Issues - Quiz
The following organizations are not real organizations, but are just used as examples for instruction. The information presented in the samples below should not be cited as law.
1. The following advertisement was placed by the ABC Foundation in a newspaper.
A position paying $10.00 is open to a person who is willing to work from 8:00 a.m. to 5:00 p.m., and who enjoys working with individuals, is friendly and can do various tasks to include answering a multi-line telephone, greeting visitors, and making coffee, etc.
Is this person designated as an independent contractor or an employee?
2. DEF Country Club, Inc. is seeking an accountant who is experienced and has specialized in working with organizations that are tax-exempt. The accountant should be knowledgeable in preparing the 990-T and the 990 returns by the due date at the end of the year, in compiling monthly financial statements and presenting these statements before the board of directors during the monthly meetings and in performing the yearly gambling audit.
Is this person designated as an independent contractor or an employee?
3. The president of ABC Foundation accomplishes daily activities of the organization to include signing checks of the organization, supervising managers that oversee employees, oversees all monthly board meetings, and executes various tasks needed to make sure the operation of the organization runs smoothly.
Is this person designated as an independent contractor or an employee?
4. A janitor, who must provide his own supplies and equipment, was hired by GHI Private School for the Gifted for the purpose of cleaning the school after hours. The janitor is given a key to the school and is allowed to enter and clean the school during off-session times. He must come at least three times per week and bills the school monthly for his services. Besides the school, the janitor has a few other clients.
Is this person designated as an independent contractor or an employee?
5. When a young person from the JKL Youth Bowling League accidentally dropped a bowling ball on spectator's foot, a suit was filed by the spectator, Mr. Jackson in a district court for $250,000. A local attorney who is contracted with JKL Youth Bowling League specializes in this type of lawsuit and charges an hourly rate of $250.
Is this person designated as an independent contractor or an employee?
6. Coaches, who are parents of the team's participating children, are hired by the MNO Little League organization's officers. All of the locations and times for the games are appointed by the board. All coaches must adhere to the procedures and policies that have been set by the organization. Unless a problem arises, officers generally don't interfere with the coaching. Each coach receives $500 per season.
Are these coaches designated as independent contractors or employees?
7. The proceeding advertisement was placed in the newspaper by the PQR Theatre--
Ticket sellers, ticket takers and ushers are needed. Hourly rates will be negotiated, depending on reliability and experience.
Is this person designated as an independent contractor or an employee?
8. A country club has a pro shop that is managed by a golf professional and his assistants who are all salaried. Furthermore, they are required by the club to instruct members of the club at rates that it has established.
Are these persons designated as independent contractors or employees?
9. With the permission of a golf club, a professional golf player sells equipment and lessons, makes appointments, and carries on all her activities on the golf club's property, without being instructed or ordered by officials or club members.
Is this person designated as independent contractor or employee?
10. Van drivers are hired by the STU Foundation for the sole purpose of transporting people who are physically disabled to their doctors' appointments. The vans are only used for this purpose; van drivers are not allowed to use the vans for any other purpose, such as side trips.
Are these persons designated as independent contractors or employees?
11. Drivers who possess their own vans and who pay for the maintenance, gas and insurance of their vans are hired by the STU Foundation to conduct people who are physically disable to their doctors' appointments. These drives may make any stops and charge a rate of $1.00 per mile.
Are these persons designated as independent contractors or employees?
12. XYZ Anonymous involves itself in gambling that is charitable. It hired a gambling manager who reports at the monthly meetings, makes all deposits, audits the games, prepares all the monthly reports, and oversees all the employees conducting the pull tab games.
Is this person designated as independent contractor or employee?

 

 

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