ALL THINGS ACCOUNTING, TAXES, AND RELATED TOPICS

Properly classifying workers as employees or independent contractors is crucial for both businesses and individuals, with significant implications for taxes, rights, and responsibilities. Let's delve into the key aspects: For businesses: Employees:  Businesses must withhold income taxes, pay Social Security and Medicare taxes (FICA), and likely unemployment taxes for employees. They are also responsible for paying their own share of FICA taxes. Failure to do so can lead to significant penalties and interest. Independent contractors:  Businesses generally do not withhold taxes or pay FICA for independent contractors. However, they are required to issue Form 1099-NEC to report payments exceeding $600.   For workers: Employees:  Employers withhold income taxes from employees' paychecks, making tax filing easier. Employees also benefit from FICA contributions, which contribute to Social Security and Medicare benefits. Independent contractors:  They are res...

As an S corporation owner, you wear many hats. You're the CEO, the marketing team, the janitor – and, most importantly, your own chief financial officer. That means when it comes to retirement planning, you've got some decisions to make. Two popular options are the solo 401(k) and the SEP-IRA, each offering unique advantages and tax implications. Let's dive into the details: Contribution Limits: Solo 401(k):  You can contribute as an employee (up to $22,500 in 2023, plus $7,500 catch-up if over 50 for a total of $30,000 for employee contributions) and as an employer up to 25% of employee compensation (W2 compensation) capped at a combined grand total employee plus employer contributions of $66,000 ($73,500 if age 50 or older). Note, S corporation income is not self-employment income so Solo 401(k) applicable to self-employment income is not discussed for this purpose. SEP-IRA:  A Simplified Employee Pension (SEP) plan provides business owners with a simplified method to...