re: Just hired my first employee, employer tax question?

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In an audit of one employee?

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The number of employees is not relevant, except that math tells us that perhaps your chance of being selected for an audit *might* be slightly less the fewer employees you have. But it's not a significant amount less.

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Couldn't you just judge the whole contractor relationship?

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A contractor relationship is not the same as an employee relationship, thus, the entire area of law that this involves. There is a 20 factor test that is used, but really, it revolves around control.

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Wouldn't it be smarter to keep a person as 1099 until you either have more than 1 employee or you build up your revenue?

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Smarter? It would be financially better, but the government knows that... hence... the laws the way they are.

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don't see the harm in putting your one employee as 1099 if you are a smaller start up

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But I may be way off.

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You are way off, but it's a common misconception. Whenever a client uses the phrase "1099 employee" I lose my shite. Seriously. I tell them I never, ever, ever, ever want them to use that phrase as long as they live.

Employees get W-2. Contractors get 1099. The quickest way to get yourself in a heap of mess is to refer to anyone getting a 1099 as an employee.

It may seem like semantics, but it can cause you a whole lot of heartburn.

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Yep. Friend of a friend is going through this now. He's perilously close to losing his business over it. 3+ years of back taxes on 3 "employees."

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And if the IRS really wants to be pricks about it... they can not only impose this, but if he doesn't pay it, they can impose the trust fund penalty, which basically makes him personally liable for the money, even if the LLC closes.

I've only seen it done once, as the trust fund penalty is usually only applied for companies that collect payroll tax and don't send it on. But the one time I saw it, it was a pretty terrible case of claiming them as contractors. They had no support whatsoever for that, and when the IRS said they were going to reclassify them as employees, the owners basically said screw you, we will just shut the LLC down. IRS didn't like that response and brought out the nuke bombs.

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It is 65 per payroll. Im guessing that's too high from the comments I see here. It was by way of referral and I was unaware how much it costed.

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You may be getting gouged for some kind of minimal fee.

I would look at this... even their full service is less than that.

Intuit payroll

If you are willing to do some of the work yourself, it's even less.

EDIT: Intuit payroll is the same thing as Quickbooks payroll, FYI

A lot of people have had success with Netchex. But their pricing varies.

I meant to say fudge, ha.

But I get that smaller companies would often blur that line, most on purpose. I also would question how would IRS be able to prove that one person who does work for you is an employee vs contractor?

Thanks - I think I fully understand what makes a person an employee vs a contractor, more so wondering the ways around it as a non law abiding citizen and all.

But, good examples.

DOL is the one that's really cracking down on it

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Why on earth are you paying a payroll fee for an employee that makes $220 a week? Get your arse on QuickBooks and do your own payroll.

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I work for a municipal tax office and have gotten multiple checks for a penny from payroll companies, that's what your're paying for.

There were a few people that posted replies that were almost fully correct, but none completely (mainly being off on SUI in Louisiana). Here is the exact breakdown...

Employer Per Pay Period Tax Responsibilities:
SS: 6.2%
MC: 1.45%
FUTA: 0.6% for the first $7,000 each employee makes
SUI: 0.1%-6.2% for the first $7,700 each employee makes (new businesses in 2016 are usually assigned the New Business Rate of 1.83%-3.2% by the LWC)

Also- that per pay period rate is high if you have only one employee. I'm a Payroll Consultant for Paychex in Baton Rouge (been doing this almost 5 years now), and see this every day. Hope it all works out! If you have any questions ever though (or want a quote that's much less than what you're paying), let me know!

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When doing planning for businesses planning to hire their first employee, we project a 2.05 initial base rate for LWC, knowing that when the app is submitted based on industry they may receive a slighly higher or lower base rate. Do you think that is still a decent projection?

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It isn't a bad estimate at all, since it's between the new business rate of 1.83-3.2%. But to be perfectly honest, when applying for the SUI Number with LWC Online, I think I've had a total of two instances when the rate was above 1.96%. Almost all are 1.83-1.87% if you apply for it correctly and work with the state to get the lowest rate.

And yes- I know Logan very well! She's awesome!