4
Jun 24

June 2024

The month of June is here and almost half of the year is over in a blink of an eye. We have been receiving some phone calls where the Internal Revenue Service (IRS) has  been taking too long to process their tax returns, even with the same filing status, dependents, credits and tax situation is the same prior year.  This year the IRS seems to be taking longer to review the tax returns.  When you check the IRS website for the status on your tax return, it may be showing it was received and in process.  Usually, your tax refund will not take longer than 21 days.  However, it may take longer due to you claiming Head of Household, Child Tax, Education, and/or Other Dependent Care Credits.  Nowadays, some people with tax returns are experiencing a longer time.  When this occurs, the IRS should send correspondence to you reflecting they are working on your taxes and should be resolved in no longer than 60 days.  Last week though, I received a call from someone who got a second letter reflecting their tax return should be resolved within an additional 60 days. If your tax circumstances are similar, you may contact The Taxpayer Advocate Service (TAS), an independent organization within the IRS, that helps taxpayers and protects taxpayers' rights.  They can offer help when tax problems seem to drag on forever.  The taxpayer should contact TAS after they have tried and have been unable to resolve their issue with the IRS, or a taxpayer believes an IRS system, process, or procedure just isn't working as it should.  Additionally, all taxpayers qualify for this assistance, which is always free.  TAS will do everything possible to help them.  Now some good news from the Florida Department of Revenue, effective June 1, 2024, the state sales tax rate imposed under section 212.031, Florida Statutes (F.S.), on the total rent charged for renting, leasing, letting, or granting a license to use real property (also known as “commercial rentals”) is reduced from 4.5% to 2.0%. Some examples of real property rentals, include rentals of commercial office or retail space, warehouses, and self-storage units or mini-warehouses.  The total rent charged includes all consideration due and payable by the tenant for the privilege or right to use or occupy the real property.  The local option discretionary sales surtax imposed by the county where the real property is located continues to apply to the total rent charged. Sales tax is due at the rate in effect during the time the tenant occupies or is entitled to occupy the real property, regardless of when the rent is paid.  Rental charges paid on or after June 1, 2024, for rental periods of December 1, 2023, through May 31, 2024, are subject to 4.5% state sales tax, plus any applicable discretionary sales surtax. Rental payments made prior to June 1, 2024, that entitle the tenant to occupy the real property on or after June 1, 2024, are subject to 2.0% state sales tax, plus any applicable discretionary sales surtax.  It is important to clarify that the reduced state sales tax rate on commercial rentals does not apply to the state sales tax rate on rentals or leases of living, sleeping, or housekeeping accommodations for six months or less (also known as “transient rentals”), parking or storage spaces for motor vehicles in parking lots or garages, docking or storage spaces for boats in boat docks or marinas, or tie-down or storage space for aircraft at airports.  More good tax stuff next month.  Remember, this is a very brief overview.  It is your responsibility to discuss any tax and financial changes with your professional advisor for assistance in evaluating your situation.  For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your tax advisor.   Provided by Pedro L. Baldeon, E.A., (321) 632-5726, a member of the National Society of Tax Professionals.  

4
Jun 24

May 2024

Finally, April is over. First, it has been reported on googlemaps.com that our company has been closed permanently. Our company has changed its name from Higginbotham Companies Inc. to Higginbotham – Baldeon Enrolled Agents, Inc. and neither closed. We have continued offering the same services to our clients for the last 35 years. Now, in the past month, there have been many people affected by their lower W-2 withholdings and resulted in them paying the IRS. To avoid paying taxes at the end of the year, you will need to have extra withholding from your paychecks. People with business filing as sole proprietors, should estimate their tax liability and pay an estimate tax to the IRS on the four payments due dates: April 15th, June 15th, September 15th, and the fourth by January 15th next year. It is essential to reconcile your monthly income and expenses to establish your net income or loss. You will then be able to project your tax liability and evaluate how your expenses are related to your income to determine if your business needs to increase prices or lower your costs to maximize your profit. This evaluation should be done by July and October. This information will be crucial to give you a better understanding of your business. It is essential to mention it is not always a good practice to buy expensive equipment or a vehicle, especially if you don’t need it; another option would be to invest the money in a retirement account, which may have been overlooked. Now, let’s turn to non-profit organizations. Every organization must file an extension or tax return by May 15th, 2024. Here is a guidance for the requirements, use Form 990 for organizations if they have gross receipts of $200,000 or more, or total assets of $500,000 or more; Form 990-EZ, called the short Form for organizations, if their annual gross receipts are less than $200,000, and total assets, at the end of their tax year, are less than $500,000; Form 990-N for organizations with annual gross receipts normally $50,000 or less, which most school non-profit organizations are and created for involved parents to promote sports. It is crucial to remember the tax-exempt status of an organization does not file a required return or notice for three consecutive years will be automatically revoked, as of the due date of the third unfiled return. Once it is revoked, organizations must file Form 1120, U.S. Corporation Income Tax Return, or a Form 1041, U.S. Income Tax Return for Estates and Trusts, and may need to pay income taxes. An automatically revoked organization may apply to reinstate its exempt status using the procedures explained in Revenue Procedures and reinstate its exempt status retroactively. Last, the amount of the penalty depends on the size of the organization. The penalty for late filing is $20 a day, not to exceed the lesser of $12,000, or 5% of the gross receipts of the organization, for the year, unless the organization can show the late filing was due to reasonable cause. For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your tax advisor. Provided by Pedro L. Baldeon, E.A., (321) 632-5726, a member of the National Society of Tax Professionals.

4
Jun 24

April 2024

There are many concerns for this month. If you received a letter from the IRS, you are not alone. Many taxpayers and businesses received those letters in March. This has been one of the biggest concerns for many people receiving letters with only the total balance due in prior years, including they may levy your assets, if you don’t resolve the balance due as soon as possible. The first step is to consult with a tax professional. The tax professional will evaluate the letter and could reduce the tax liability by filing an amended return if any expenses on prior tax return were overlooked or missed, especially with small business filing Schedule C on their personal tax returns. That reminds me, for businesses claiming the standard mileage rate of 65.5 cents per mile, the IRS requires that you must substantiate business mileage in a contemporaneous log, with each trip’s starting and ending points, date, and business purpose. The standard mileage rate allows for separate deductions for parking and tolls. Other expenses that require substantiation by the IRS are Business meals; these meals need to record the date, individuals participating, and business purpose. Next, the bank statements and related records are insufficient to prove the business payments were ordinary and necessary business expenses. The debit card purchases generally identify to whom payments were made, but not exactly what was purchased or the business purpose of the purchase, and records of checks with only the check number and amount paid, but no annotations for any goods or services purchased, will be not enough to define between personal and business expenses. Last, this is a reminder to pay your taxes by April 15th, or pay as much as you can and file an extension by April 15th. This gives you six months to file the return until October 15th, 2024. Any unpaid taxes after April 15th, will incur an approximate 1% per month, or part of the month the tax liability, assessed penalty and interest. There is maybe another way to help lower your tax liability and save money for your retirement. Ask your tax preparer if a contribution to a traditional IRA (Individual Retirement Accounts) will be beneficial to reduce your taxes. Contributions made to the traditional IRA are with pre-tax dollars. Remember and you will pay taxes on all growth from this account when you withdraw the money from the IRA. These contributions will lower your income for the tax year of contribution and will result in less tax liability. The IRA contributions are limited by the lesser of your earned income, or $6,500 if you are under 50 and $7,500 if you are 50 and older for 2023. In the case of a married couple, you may duplicate your contributions. Perhaps there is a threshold limit if you are already on a retirement plan at work. If you are single, the full deduction is on $73,000 or less of your MAGI (Modified Adjust Gross Income) and $116,000 or less of your MAGI if you are married and filing jointly. You have until April 15th to make your contributions for the tax year 2023. That means by April 15th, 2024, you can contribute for your 2023 tax year, up to $6,500 or $7,500, if you are 50 and older. Also, from January 1st, 2024, through April 15th, 2025, you can contribute $7,000 or $8,000, if you are 50 and older. Remember, this is a very brief overview. It is your responsibility to discuss any tax and financial changes with your professional advisor for assistance in evaluating your situation. For details and specific assistance in applying the general information in this article, you may contact our office at your earliest convenience or contact your advisor. Provided by Pedro L. Baldeon, E.A., (321) 632-5726, a member of the National Society of Accountants.

4
Jun 24

March 2024

Here are some important due dates to remember for taxpayers with businesses. The first is for taxpayers who file Form 1120-S for S-Corporations and Form 1065 for Partnerships. These are due on March 15th. The penalty for late filing is $235 per month, per shareholder, or partner, with a maximum penalty of twelve (12) months. If you want to avoid this and, you need more time to gather your receipts, complete all the information necessary for your income and expenses; you’ll need to file an extension for your company by March 15th, 2024. The extension will allow you to complete your financial information and file your company tax return by September 16th, since this year, September 15th is on Sunday, and the due date will be the next business day, September 16th, 2024. If you filed an extension for your personal tax return on April 15th, 2024, your personal tax return will be due October 15th, 2024. However, it is crucial to clarify the misconception about the extension of the personal tax return. The extension is to file your personal return six months later and any estimated tax liabilities are due on April 15th, 2024. You’ll be charged with penalty and interest for any month, or fraction thereof, on the tax liability not paid on or before April 15th, 2024. Next, after you file your tax return with your payment, the Internal Revenue Service Center (IRS) will send you a letter with total penalties and interest calculated after your tax return is processed. Nevertheless, you can make monthly payments until October 15th, at any time, to reduce these penalties and interest. A reminder to taxpayers requesting the IRS to treat your Limited Liability Company (LLC) as an S corporation requires filing the Form 2553. This election must be made no later than two (2) months and fifteen (15) days after the beginning of the corporation’s tax year and  this date to file is March 15th, 2024. Perhaps, in the first year of operations, the company missed the due date. You can apply for late election relief, with reasonable cause, for failing to file Form 2553 on time. The next topic, due by April 1st, 2024, is the Retirement Minimum Distributions (RMD). Beginning in 2023, the excise tax for not taking the RMD has been reduced from 50% to 25%. Yes, you will have to withdraw the money and pay an extra 25% tax. Perhaps, you have an opportunity to apply for a waiver on Form 5329. The RMD is the minimum amount you need to withdraw every year from your Traditional Retirement Account (IRA), SIMPLE IRA, SEP IRA, 401(k) or other retirement account when you reach age 72 (73 if you reach age 72 after December 31st, 2022) by April 1st, of the following calendar year. You reach age 72 (73 if you reach age 72 after December 31, 2022). Next,  Roth IRA’s do not require withdrawals by the living owner. Additionally, designated ROTH in 401(k) or 403(k) plans are still subject to RMD rules for 2022 and 2023. Good news for 2024 and later years, the designated ROTH accounts no longer require an RMD. One last item involves the new Beneficial Ownership Information Reporting requirement by the U.S. Treasury.  Any entity registered with the Florida Division of Corporations needs to review the filing requirements and the reporting is due by March 31, 2024, or sooner if organized during 2024.  Go to boiefiling.fincen.gov for more information or call our office.  Failure to file will result in an astronomically severe penalty.  For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your tax advisor.   Provided by Pedro L. Baldeon, E.A., (321) 632-5726, a member of the National Society of Tax Professionals.  

4
Jun 24

February 2024

Welcome, everybody; I am Pedro Baldeon, EA. I have been preparing tax returns for over seven years. For the last four years, I have been working for Higginbotham Companies Inc. under Tracey's guidance, and it is time for me to take the reins and write the monthly tax update articles. Shortly after January 31st, everyone should receive your tax Forms 1099-INT,1099-R, W-2,1099-NEC, and by the end of February your Forms 1099-S, 1099-DIV, and 1099-B. Next, an important reminder for taxpayers with health insurance through the Marketplace: go online at Healthcare.gov, log into your account, and download your Form 1095-A, or contact your insurance agent. You can't imagine how many tax returns have been rejected because Form 1095-A was not reconciled in the return. Also, for taxpayers with a qualified child, don't forget to pick up your yearly statement from childcare, which will be used to claim the childcare credit. In addition, taxpayers claiming Earn Income credit (EIC), child tax credits (CTC), and additional tax credits should file their tax returns before February 15th, 2024. This may prevent someone else from using your dependent's information to file taxes before you fraudulently. By Law, The IRS can't issue any EIC or CTC refunds before mid-February; on the IRS website, the section "Where's my refund" will show an updated status by February 17th for early filers claiming any EIC or CTC. But, you could expect to get your refund by February 27th, if you filed electronically, there are no issues with your tax return, and you choose direct deposit. So, gather your documents for your appointment with your tax advisor. This year, for people with businesses, we have a new reporting requirement by The Financial Crimes Enforcement Network (FinCEN) and The Beneficial Ownership Information (BOI). In 2021, Congress enacted the Corporate Transparency Act; this Act was implemented to make it harder for bad people to hide their business. Beginning January 2024, Companies registering with the State must file the Beneficial Ownership Information Report (BOIR). It will gather information for anyone who exercises substantial control or owns/controls at least 25 percent of the ownership interest of a reporting company. You will need to provide your full name, date of birth, complete current address, and a picture of your U.S. ID, like a Driver's License or Passport. However, if an individual fails to report the Beneficial Ownership Information (BOI) and attempts to report false information, it could result in a Civil penalty of up to $500 per day, or prison for up to two years and/or up to a $10,000 fine. Finally, here is the guidance for the due dates; if the company has been registered with Florida Division of Corporations, before January 1, 2024, they have until January 1, 2025. If your company was registered on or after January 1, 2024, they have 90 days to file after the company was registered with the State. If your company was registered on or after January 1, 2025, the company has only 30 days to file. Last, the company has to report any correction or update the information within 30 days. This is a very brief overview.  For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your tax advisor.   Provided by Pedro L. Baldeon, E.A., (321) 632-5726, a member of the National Society of Tax Professionals.  

4
Jun 24

January 2024

I want to take a moment and express my gratitude for your interest in reading my articles.  I hope the information provided has been something of interest to you over these years.  With that, it is time to say good-bye to 2023 and start looking forward to 2024.  As the New Year has arrived, everyone should take a few minutes to make sure that they have all of their paperwork in order for the upcoming income tax filing season.  This is the time to gather together the pertinent information needed to prepare your tax return.  Make sure your employer has your correct address.  Especially, if you have moved during the year, you may have changed it with your current employer, but failed to inform your former employer(s).  Have you had a change in your life, such as marriage, or birth of a child, or a child starting college?  Maybe you have had to step in and take care of a loved one with medical issues and needed full time care.  January is the perfect month to sit down and review the previous year changes and get yourself prepared to have your income tax return prepared.  Of course, everyone starts anticipating when they will get their W2’s and when they expect to receive their refund.  Most employers have the W2’s available the last week of the month.  Officially, they have until January 31st to have them prepared and mailed out.  It just seems natural to take the next couple of weeks and make sure you will have all the documents required to have your return prepared.  Okay, now let’s pick it up a little bit and discuss credits.  There are two types of credits beneficial to the everyday taxpayer, refundable and nonrefundable.  The nonrefundable will reduce the amount of tax owed on taxable income.   The most widely used ones are the Child and Dependent Care, Education, Retirement and Child Tax credits.  Whereas the refundable credits may provide additional tax refund and the most popular ones are the Earned Income, the American Opportunity Education, and the Child Tax credit.  Now, let’s briefly look at each one.  The Child and Dependent Care Credit provides a credit for the care of your younger child(ren) who are under 14 years old or handicap and your dependent.  The Education credit involves the American Opportunity Education Credit or the the Lifetime Learning Credit and these provide a tax credit for you, your spouse, or dependent to attend an accredited college course or approved trade school curriculum.  The Retirement Savings Contribution Credit provides for a credit when you contribute to any type of retirement arrangement.  The Child Tax Credit provides for a reduction of taxes or additional refund if you have dependent children younger than 17 years of age.  And, finally, the Earned Income Tax Credit provides additional refund if your earned income and/or adjusted gross income falls within credit parameters.  On another note, I want to take a moment and remind everyone the discharging of a weapon in a residential neighborhood is unlawful, unless it involves a stand your ground circumstance, only.  In closing, this is my last monthly tax update I will be writing.  Pedro Baldeon, EA is taking over the reins of our tax preparation and representation, accounting, payroll activities, along writing the monthly tax update.  I really appreciate knowing how many of you have read my articles over all these years.  Thank you!!!  We wish everyone a prosperous and healthy 2024!!!  This is a very brief overview. For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your tax advisor.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.   

4
Jun 24

December 2023

The IRS has issued tax information for 2024.  These are the numbers that you’ll use to prepare your 2024 tax returns in 2025.  There will be seven (7) tax rates in 2021.  They are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.  Please contact my office to find out the breakdown for your applicable tax on your taxable income.  Your Personal Exemption Amount we used to have, is still not separated, and included in your standard deduction.  The standard deduction amounts will increase to $14,600 for individuals and married couples filing separately, representing an increase of $750 from 2023. Married couples filing jointly will see a deduction of $29,200, a boost of $1,500 from 2023, while heads of household will see a jump to $21,900 for heads of household, an increase of $1,100 from 2023.  For 2024, the additional standard deduction amount for the aged or the blind is $1,550 for married filing joint filers.  The additional standard deduction amount increases to $1,950 for unmarried taxpayers.  For 2024, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,300 or the sum of $450 and the individual’s earned income (not to exceed the regular standard deduction amount).  The Kiddie Tax applies to unearned income for children under the age of 19, a college student, and the under the age of 24.  Unearned income is income from sources other than wages and salary, like dividends and interest.  Your child must pay taxes on their unearned income in 2024, but if that amount is more than $1,300, but less than $13,000, you may be able to elect to include that income on your return rather than file a separate return for your child.  Right now, the Child Tax Credit is a refundable child tax credit of $1,700 in 2024, unless Congress makes a late change.  For 2024, the maximum Earned Income Tax Credit (EITC) amount available is $7,830 for married taxpayers filing jointly who have three or more qualifying children—it was $7,430 in 2023, and again subject to the phaseout rules.  Capital Gains rates will not change for 2024, but the brackets for the rates will change.  Most taxpayers pay a maximum 15% rate, but a 20% tax rate applies if your taxable income exceeds the thresholds set for the 37% ordinary tax rate. Exceptions also apply for art, collectible, and section 1250 gain (related to depreciation).   The alternative minimum tax (AMT) exemption rate is also subject to inflation.  The AMT exemption amount for tax year 2024 for single filers is $85,700 and begins to phase out at $609,350 (in 2023, the exemption amount for single filers was $81,300 and began to phase out at $578,150).  In 2024, the AMT exemption amount for married couples filing jointly is $133,300 and begins to phase out at $1,218,700 (in 2023, the exemption amount for married couples filing jointly was $126,500 and began to phase out at $1,156,300.  In 2024, the foreign-earned income exclusion amount is $126,500, up from $120,000 for tax year 2023.  And, the federal gift tax exclusion will increase to $18,000 in 2024, up from $17,000 in 2023.  In closing, myself, and my staff, wish everyone a happy and safe Holiday Season, with success and love in the New Year. God Bless!  This is a very brief overview.   For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your tax advisor.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.

7
Nov 23

Protection PIN (July-2023)

This month, I’m providing information from the Internal Revenue Service Center on how an Identity Protection PIN will help shield you from tax-related identity theft from Tax Tip 2023-70.  Your participation in this program will provide you a six-digit number to prove your identity when a tax return is filed by you or your tax preparer.  The IRS’s Identity Protection PIN is an added layer of security and is the number one security tool currently available.  The PIN is available by going to IRS.gov and search the website for “PIN”.  There will be a new pop-up screen and you’ll see “Get an Identity Protection PIN”.  If you have a Social Security Number or individual taxpayer identification number, you’ll be able to request an IP PIN online.  You’ll need to review the identity verification requirements before you try to us the tool.  Be advised the IP PIN is valid for only one year.  Therefore, each year you will receive a new IP PIN and some will receive it through the mail or you’ll have to log into the “Get an IP PIN” tools to see your current IP PIN.  You’ll also use your annual PIN to file current year tax returns and any prior or amended tax returns submitted during the year electronically.  Be advised, IRS will never call, email, or text a request for your IP PIN and you should share your PIN only with an IRS agent or your tax preparer.  Sometimes, some fail to validate their identity online and you’ll have to file the Form 15227, Application for an Identity Protection Personal Identification Number.  Once IRS receives the form, a representative will call you at the phone number you provided to validate your identity.  Once verified, you’ll get an IP PIN in the mail, usually within four to six weeks.  If this fails, you’ll have to file the Form 15227 by making an appointment at the Taxpayer Assistance Center in Melbourne, Fl. for face-to-face verification.  You’ll need to bring one current government-issued picture ID and another picture ID to prove your identity.  Once verified, you’ll get your IP PIN in the mail, usually within three weeks.  Again, this was a restatement of IRS Tax Tip 2023-70.  On a short note, did you know the Internal Revenue Service has an Interactive Tax Assistant.  Go to irs.gov and you’ll see an icon “Get Answers to Your Tax Questions”.  Click on the icon and the next screen will provide you an opportunity to enter your question and utilizing the Interactive Tax Assistance Search method.  Also, if you scroll down, there is a number of questions already reflected for immediate explanation of many questions.  In doubt, it’s better for you to review your concern here or give your tax professional a call.  Doing it right the first time is better than having to redo as a second time.  Last, I hope everyone enjoyed the 4th of July Fireworks, Thunder Over the Indian River!!! We appreciate the opportunity to be a prime sponsor and I want to thank the Port St. John Community Foundation, Inc. members for their efforts making our community one of the best to live in.  Be sure to let them know!  This is a very brief overview.  Additional details and specific assistance in applying the general information in this article may be attained by contacting your tax professional or our office.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.

19
Jun 23

Form 1099-K (May-2023)

This month I want to discuss the Form 1099-K.  This form is for reporting the payments of credit cards and third party network transactions.  It is prepared by the processing company and sent out to the business activities where it will be reflected in your business returns.  This will assist in determining the correct tax liability and will be part of your total gross income.  The 1099-K will reflects transactions where income is derived from a business the taxpayer owns, self-employment, gig economy activities and the sale of personal items and assets through online selling websites.  So, what do you do when you receive a Form 1099-K reflecting incorrect amounts.  You’ll have to contact the issuer of the form and request a corrected form.  This may not be an easy task.  Be prepared to have documentation to support your position.  I’m sure you’ll need this and if your efforts turn out futile, you are able to follow the IRS’s guidance on Understanding Your Form 1099-K.  The threshold filing requirement for 2022 and prior years was $20,000 sell transactions and/or 200 transactions per year.  The American Rescue Plan of 2021 changed the threshold to $600 sell transactions without any regards to the number of transactions for 2023 and future years.  This means just about anyone doing any kind of business activities will most likely receive a Form 1099-K.  I know I don’t have to say this, but accurate recordkeeping is upmost important even more.  IRS is tightening the reporting requirements.  They may not increase taxes on the middle and lower class taxpayers, but they definitely are increasing scrutiny to promote tax compliance on the middle and lower class taxpayers.  On another note, let’s talk about payments again.  You may have filed and extension due to the fact you couldn’t pay the tax lability resulting from the new W-4 calculation method.  With that, you are able to make payments utilizing the “Make a Payment” icon reflected on the irs.gov website.  You can make as many payments as you want for the tax liability for 2022, you can make payments for estimated tax payments for 2023, and other payment requirements.  It’s user friendly and simple to do.  You enter your pertinent information, checking account information, the amount you want to pay, hit submit it and you immediately receive a confirmation on your payment and a copy of your payment will be sent to your email address.  It beats writing a check and mailing it.  If you need help, my Associate Enrolled Agent or myself will be happy to assist you.  Give us a call.  For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your tax advisor.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.

27
Apr 23

Classification of Employees and Independent Contractors. (April-2023)

If you own a business and have someone helping you this article is for you.  Especially, if you classify them as subcontractors and they may actually be an employee.  Be advised, the Internal Revenue Service (IRS) has prioritized this relationship as a priority to investigate.  Worker Classification Remains a Priority for the IRS.  They continue to seek back payroll taxes and penalties from firms that wrongly treat workers as contractors.  There are three tests used to determine the correct classification of workers.  First, the behavioral test looks at whether the firm controls or has the right to control the worker’s job. Key factors for employee status include instructions about doing the work, evaluation criteria and training.   Second, the financial test looks at who controls the economics of the worker’s job.  Being able to work for multiple firms and providing your own tools needed for the job are indicative of independent contractor status.  Some factors favoring employee status are eligibility for reimbursement of travel costs and payment based on hours worked.  And third, the type-of-relationship test examines how the parties perceive each other.  Evidence of an employer-employee setup includes giving paid sick days, vacation days, and retirement benefits, as well as hiring the worker to render services indefinitely, rather than for a specific time period or project.  Written language in a contract stating the worker is an independent contractor isn’t the determinative under this factor. Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor.  With these three test in mind, some factors may indicate the worker is an employee, while other factors indicate that the worker is an independent contractor.  There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor and no one factor stands alone in making this determination.  Also, factors which are relevant in one situation may not be relevant in another.  If it is still unclear whether a worker is an employee or an independent contractor after reviewing the three categories of evidence, you may file the Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS for their review.  The form may be filed by either the business or the worker.  The IRS will review the facts and circumstances and officially determine the worker’s status.  The Labor Dept. is also getting aggressive about worker classification.  It issued a tougher interpretation of the classification rules for workers under the Fair Labor Standards Act.  The proposed regs would rescind previous rules published by the Trump administration in early January 2021.  The new proposal, which focuses on the totality of the circumstances, has a nonexhaustive list of factors for a firm to consider in determining whether its workers are employees or contractors. The rule, if finalized as proposed, is expected to increase the number of workers that are classified as employees when compared with the 2021 regulations.  In closing, to our clients, THANK YOU!!!.  Because of you, our office had another successful tax season.  Also, to the many of you who read my articles, THANK YOU.  I hope it helps.  For additional details and specific assistance in applying the general information in this article, contact your tax advisor or call us at your earliest convenience.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.