Employee Taxes??

[Mattitude]

If me and my partner can do 80% of the work on our own, but want to hire a part-time employee to help out what is the best method?

Do we have to pay taxes and such?

OR

Can we hire an employee as a CONTRACT LABORER?

[justmjc]

Contract laborers are the same as employees, so you would have to pay taxes on them only if you have them on payroll. However, if you don't have them on payroll, and they get hurt, it might be your butt on the line. The only way to get around it would be if they were providing a service to you, where you have little to no control over there actions, time of work, or method of accomplishment, similiar to a sub-contracting situation. Since, I don't see that happening here, your choices would be to pay cash under the table, or put them on payroll.

If you put them on payroll, you will get to deduct there wage as an expense from your income, thus not paying taxes on them. However, you do have to pay workers comp, and that is a percentage of what they make working for you. You might offer benifits and other purks, but that's all write-off. So, paying taxes is not really as bad as it may seem. It's all about making the most cash by multiplying your efforts, with as minimum strain to you. The only way to do this is to hire responsible employees.

[Seascape]

Youd have to hire them under the table. I Dont suggest that. Only other way is to have invoices from them. Youll have the irs all over your butt if you go that way.
mike

[PearceTurf]

This may be a long response but important

I don't want to keep using the excuse of "Well my wife is a CPA with LCO experience" because I have my own brain as well (former auditor). So I will comment on a few things and try to keep it short.

Seascape and Just are right, but only to a certain extent. Paying somebody "under the table" seems harmless and cheaper and a better deal for you and for your hired hand in most cases. But so many negative factors are possible (quite possible) that make it too risky in most situations. I am in NC so some of this may not apply to all states, but please hear me out.

The IRS, your worker's compensation insurance carrier, and your general liablility insurance carrier use pretty much the same checklist when qualifying a person as a subcontractor vs. an employee. What you have described in your post is an employee.

If you pay someone what you call "a subcontractor" on your books and pay them more than $600, then you must give them a 1099. Not so bad if it is $601, but what if it is $6000. Now you have red flags not only with the IRS, but the ESC (Employment Security Commission in NC). Look at the checklist and you will find that almost all so called "contract or subcontract labor" does not match the checklist. Paying somebody "under the table" only works if you are able to predict the future and I have never met anybody that really can. If that "imaginary" person working for you falls off the roof while cleaning gutters and breaks his neck or gets killed, you can bet his family's lawyer will be on your butt and you are in big trouble.

I am assuming that you and your partner are real businessmen and have a general liability insurance policy. Based on what you posted, you have not yet needed work comp insurance. If you two are not a bona fide company, then everything I have said so far doesn't mean squat. But since (I assume) you are, hiring an employee will lead to many circumstances. I could go on and on but it would take a phone call or actual meeting to finish this conversation. If an employee that works for a company takes that first check for injury, he/she cannot sue you for negligence. If you have none, your GL policy is wide open for a lawsuit.

You may get many other replies on this post ( a very good post) saying that I'm full of crap. But I can promise you, I know very little about Exmark or sod, but what I have stated can be backed up by the IRS, the insurance industry, the ESC and the lawyers waiting in the wings that advertise on TV. I don't mean to brag, but be careful about free advice, since sometimes it is only worth what you paid for it. I'm not an expert on everything, but I don't want a fellow LCO buddy make an informed decision and get screwed later on. That's all.