Contractor or employee?
Getting classification wrong exposes you to back withholding, the employer's share, penalties and interest, across every year the person worked for you.
Tax service
Payroll & employment tax compliance
Payroll tax is the fastest-escalating liability a business can carry. The penalties are steep, they compound, and they follow individuals personally.
The problem
Where employment tax goes wrong
Rarely through dishonesty. Usually through a classification decision made casually, or a deposit schedule nobody re-checked.
Deposit schedule missed
Deposit penalties escalate by how late the payment is, reaching 15%. A schedule that changes with your lookback period is easy to miss and expensive to ignore.
Trust fund recovery penalty
Unremitted withholding can be assessed personally against any responsible person under Section 6672: owners, officers, and sometimes the bookkeeper.
What we do
What we cover
The filings themselves, and the decisions upstream that determine whether the filings are right.
- Quarterly and annual returnsForm 941 each quarter, Form 940 for federal unemployment, and Florida Form RT-6 reemployment tax filings.
- Year-end information reportingForms W-2 and W-3, Forms 1099-NEC and 1099-MISC, with the January deadlines managed rather than met at a sprint.
- Worker classification reviewApplying the common-law control test to each role, documenting the analysis, and using Form SS-8 or Section 530 relief where the position is genuinely uncertain.
- Reasonable compensation supportFor S-corp owners, a market-supported wage figure with written substantiation, the position most likely to be challenged in an S-corp examination.
- Fringe benefit and expense treatmentHealth insurance for more-than-2% shareholders, personal use of company vehicles, accountable plans, and taxable fringe benefits reported correctly.
- Multi-state payroll registrationWithholding and unemployment registrations wherever employees actually work, including remote staff who moved without telling anyone.
- Notice response and remediationCorrecting prior filings on Form 941-X, responding to deposit penalty notices, and requesting abatement where reasonable cause exists.
How it works
A process you can follow
Four stages, with a defined deliverable at each one. You always know where the work stands.
1
Review
Current filings, deposit schedule, classification decisions and state registrations checked against where your people actually are.
2
Correct
Anything mis-stated is fixed on amended filings, with penalty abatement requested where there are grounds.
3
Document
Classification analyses and reasonable compensation studies written down, because an undocumented position is very hard to defend.
4
Maintain
Ongoing quarterly and annual filings, with deposit schedules re-tested each lookback period.
Who it's for
Who we work with
Employers where the payroll is complicated enough that the default settings in the payroll software are not sufficient.
S-corps with owner payroll Employers with remote staff Businesses using contractors Multi-state employers Seasonal and hourly workforces Companies with fringe benefits Firms with prior payroll notices
Deliverables
What you get
- All federal and state employment tax returns prepared and filed on schedule
- A written worker classification analysis for every contractor role
- A documented reasonable compensation figure for each owner-employee
- Deposit schedule confirmed against the current lookback period
- Notice handling and penalty abatement requests included
6672
The section that makes payroll tax personal
15%
Maximum federal deposit penalty tier
31 Jan
W-2 and 1099-NEC filing deadline
Questions
Frequently asked
Only if they genuinely are contractors, and the test is behavioral and economic rather than contractual. If you control how, when and where the work is done, provide the tools, and the relationship is ongoing and exclusive, that is an employee regardless of what the agreement says. Misclassification is one of the most expensive errors a small employer can make, because it reaches back across every year of the relationship.
The federal penalty is tiered by lateness: 2% for one to five days, 5% for six to fifteen, 10% beyond that, and 15% once the IRS has issued a demand. Interest accrues alongside. A single late deposit is usually recoverable, particularly with a first-time abatement request. A pattern is treated very differently and can trigger a trust fund recovery penalty investigation.
Almost always, yes. A single employee working from another state generally creates withholding and unemployment insurance obligations there from their first day, and frequently income tax nexus for the business as well. Reciprocity agreements and convenience-of-the-employer rules complicate it further. This is the single most common compliance gap we find in businesses that went remote.
We do not operate a payroll bureau, and we would rather you used a good platform than a mediocre in-house process. What we do is make sure the platform is configured correctly, the classifications are right, the registrations are in place, and the returns and year-end forms are accurate. Most payroll problems we see are configuration and classification issues, not processing errors.
Related
Often paired with
Business Tax Returns
Forms 1120, 1120-S and 1065 filed accurately and on time.
Learn moreInternal Controls & Tax Risk
Auditor-built controls that keep every filing clean.
Learn moreOutsourced Accounting & CFO
Books, close and reporting your advisors can rely on.
Learn more