Independent Contractor Compliance Blog - by Collabrus™

I’ve rounded up a collection of seemingly random facts that are only part of our environment as we enter 2009 (there’s not enough time and space for everything such as; pending legislation, the stock market, bank bail out, car manufacturers bailout, or international competition).  Some of these facts approach trivia and some are significant.

However, anyone can see the cost (including taxes) of doing business is likely to rise while the economy will continue to struggle at least for the first part of the year.

On the State Level

California’s unemployment rate is 8.4 percent according to the California Employment Development Department (EDD). The EDD gets more money to enforce the UI laws (IC compliance) as the unemployment rate increases.

UI taxable limit for 2009 wages remains at $7,000; however, the governor has created a committee to review the California’s tax structure (including UI taxable limits).

The 2009 State Disability Insurance (SDI) tax rate is 1.1 percent (I believe that is the highest it has ever been). The SDI taxable limit is $90,669 paid each employee.

There is no taxable limit for California’s personal income tax withheld from employees’ pay.

EDD’s interest rate for the first quarter of 2009 will be 5%, compounded daily from the original date the state determines you should have paid until it is paid.  Interest can not be forgiven or waived under California law.

Did you know the Board of Equalization levies a Lead Fee?

The fee ranges from $278 and $1395 for 2008.  The fee applies to most employers who have 10 or more employees, although there are provisions for a wavier.  For more information about this fee contact the Board of Equalization website @ www.boe.ca.gov, or call their Taxpayer Information Section: 800?400?7115.

Newspapers are reporting the State of California will be broke by February and the FTB may not even be able to pay income tax refunds in April.

On the National Level

President-elect Barack Obama warned this week that the federal deficit is likely to rise to nearly $1 trillion this year, saying the budget gap underscores the need for long-term reform of the nation’s finances (does that mean collecting more taxes?).

The interest rate charged by the IRS in the first quarter of 2009 is 5%.

Do you know what an IRS Lock-In Letter is?

If the IRS determines that an employee is not authorizing enough withholding on their Form W-4, they issue a “lock-in” letter that specifies the maximum number of withholding allowances permitted for the employee.  After the receipt of a lock-in letter, you must disregard any Form W-4 by that employee that decreases the amount of withholding.  The penalty for not following the IRS lock-in instructions is your company will be liable for paying the additional amount of tax that should have been withheld.

The IRS is now tracking and reporting to Congress there is an International Tax Gap. in addition to the Domestic Tax Gap.

I’ll cover this issue in a separate article.

The IRS is increasing the number of Criminal Prosecutions each year.

For example the last three years they have published information on criminal cases prosecuted are:

It seems to be increasing…

Even before taking office President-Elect Obama is gathering support for a national healthcare program.  However, there are clearly two sides to this issue.

1. Industry groups, such as healthcare insurers, are objecting to creating a public insurance program.
2. Obama supporters such as AARP, MoveOn.org and the Service Employees International Union are pressuring to pass healthcare legislation.

What does this all mean?

The short answer:  The costs (including taxes) of doing business are likely to rise while the economy is still struggling so businesses need to cut costs but not corners.  Using IC’s can save you money if done properly with the help of an expert.  The year 2009 promises increased taxes and enforcement.  Don’t guess at the status of your contingent workers, because cutting corners on IC compliance can come back to haunt you.