Misclassification of an employee can cost small business a lot of money

Misclassification of an employee can cost small business a lot of money

Beware of misclassification of an employee

Treating employees as non-employees

You will be liable for social security and Medicare taxes and withheld income tax if you do not deduct and withhold them because you treat an employee as a nonemployee, including yourself if you are a corporate officer, and you may be liable for a  trust fund recovery penalty. Refer to Publication 15, Circular E, Employer’s Tax Guide for details about the trust fund recovery penalty or Independent Contractor for more information on employee classification.

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