Independent Contractors

The use of independent contractors is an acceptable practice if they are in fact independent. However, the IRS and the California Employment Development Department will be very aggressive to dispute your "independent" claim. California's requirements are more restrictive. Paying someone as an independent contractor who does not qualify, can become very expensive. The contractor may file an unemployment claim that leads to an audit of your business. You may be liable to pay both the employer's share of payroll taxes plus what should have been withheld. If the contractor is injured while working for you, they may not be covered by your insurance.  A guide, DE 38, is available at the Employment Development Department's web site  http://www.edd.ca.gov/ . A licensed construction contractor is subject to even tighter restrictions.

Payroll Taxes

The rules for depositing payroll taxes are complex and confusing. Not paying payroll taxes on time results in penalties and interest. Since the majority of payroll taxes to be deposited are someone else's money (withholding), the government is unforgiving for late payments. The person who signs checks can be held personally responsible even in a corporation, LLC or a non-profit group. If money is tight, not paying payroll taxes should be the last option.

Paying Your Bills

Good credit is essential for a business to be successful.  Don't allow credit card companies to steal your money with high interest rates and late fees because your payment is late. Your vendors and suppliers may not charge interest but they will not give you the best prices and service if you are a slow pay. Complete and accurate accounting records can help you manage your cash flow and keep your bills paid. 

Email    Phone 760 536-2579