Labels Matter to the IRS

Last week, I drafted a new article for WomenEntrepreneur.com on how to decide whether you should label your new employee as an independent contractor or a standard wage earning employee. You can find a snippet of the article below, or visit WomenEntrepreneur.com for the full text.

When business owners start looking into hiring employees, many are overwhelmed at how expensive it can be. Of course, you must pay this person a decent wage, but there are even more expensive costs: taxes.

And there are a lot of them to think about: unemployment taxes, payroll taxes (7.65 percent of the employee's total salary) and other taxes.

Some business owners try to sidestep these tax issues by hiring workers as "independent contractors." Sounds like a good idea, right? Independent contractors do the work but save you the hassle of payroll taxes, tax withholding and unemployment taxes. Hold on! Before you jump aboard the independent contractor bandwagon, you need to understand that the IRS has a say in the matter.

The IRS has very strict rules for determining who is an independent contractor and who is an employee. How you classify your workers revolves around three basic characteristics:

Behavioral control: Do you as the business owner have the right to determine how the work is done via training or instructions, for example?

Financial control: Do you as the business owner have the right to determine or control the financial or business aspects of the work?

Type of relationship: Do you or your workers perceive an employer-employee relationship?

Hire Now, Save Later

Earlier in the week a new article of mine was published on WomenEntrepreneur.com. In the new piece, I explained to readers of the site how to save thousands of dollars by taking advantage of the tax incentives for hiring new employees who were previously unemployed.

The first tax break offsets the employer's portion of Social Security taxes on the new employee's wages from March 19, 2010, to Dec. 31, 2010. So, the 6.2 percent of the employee's wages you would normally contribute to Social Security stays in your business. This does not alter the employee's future Social Security benefits. You are still responsible for withholding the employee's share of payroll and income taxes, and paying the regular Medicare taxes.

The second tax benefit from the HIRE Act allows you to claim a general business tax credit for each new hire still employed after one year, as long as that employee's wages did not significantly decrease over the course of the year. The credit is worth up to $1,000, or 6.2 percent of the employee's total wages, whichever is less. Since you can only claim the credit after the employee completes one full year of service, you would claim the credit on your 2011 tax return. A bit of a delayed benefit, but $1,000 is nothing to sneeze at.

Between these two breaks, you can save thousands of dollars in taxes. Better still, if you need to do a lot of hiring, there is no limit on the number of employees for whom you can claim the credits.

Of course, with anything involving the IRS, there are rules and restrictions. Here is what you need to know:

Continue reading at WomenEntrepreneur.com…

Work-Life Balance in the Legal Profession: A Necessity Even in a Down Economy

Earlier in the week one of my favorite blogs – The Glass Hammer – posted a very interesting article on how so many attorneys have been willing to neglect their personal lives to avoid being let go. However, as the article explains it is important to give yourself some personal time so that you can be both mentally and physically ready for the demands of your job. You can find a snippet of their post below, but be sure to head over to The Glass Hammer for the full text, including a list of the top 10 family friendly law firms in the country.

Over the last year, in large law firms across the country, associates have lived in fear of losing their jobs, accepting and even seeking out longer hours at the office in the hope that if they can accumulate enough billable hours, their jobs will be spared. Unfortunately, such a practice is leading to growing dissatisfaction for all involved. Associates are worn out and resentful of their current predicament. Clients are becoming fed up with large legal bills which reflect the work of several attorneys billing a significant number of hours in order to produce a single piece of work product. Law firm partners are struggling to maintain and bring in business since clients are going in increasing numbers to smaller firms where the same legal work can be done for a lot less.

In this time of high unemployment and economic hardship, should we consider work-life balance a luxury, available only when economic times are good, and just be thankful we have jobs at all?

Although the answer from many quarters seems to be “yes”, others believe that sacrificing work-life balance is not the best strategy to surviving a tough economy. Lisa Gates, life balance coach and author of “Are You Ditching Work-Life Balance Because You’re Afraid of Losing Your Job?” explains that balancing work and personal life in a down economy is important, not just for your well-being outside of work, but to ensure you remain mentally and physically prepared to successfully carry out workplace goals and make sound decisions in your career.

Large law firms can learn from those employers which have already recognized the importance of work-life balance. According to Susan Fenton, author of “Firms Say Work-Life Balance Boosts Productivity”, companies such as Dutch mail company TNT, oil company BP, and US computer maker Sun Microsystems Inc. have found that work life imbalances lead to increased business costs. As a result of these findings, these companies have adopted more flexible working arrangements which they say motivate employees, resulting in increased productivity and efficiency.

Leadership Advice for Current and Future Executive Women

Earlier today I came across this helpful article on one of my favorite blogs, the Glass Hammer, with leadership advice from various executive women. Being a woman in the business word can be difficult, to say the least. Fortunately, the bloggers at the Glass Hammer have gathered some simple and straightforward advice. Check out a clip of their article below.

Get Really, Really, Really Good at Your Job.
“I didn’t chart my career out,” said Sutton, “but I always had a good view of what I loved doing and what the next career step might be.” Sutton started her career in finance as a clerk with Wachovia and worked her way up through the organization over 35 years, until she left to establish the banking business for Morgan Stanley. She added, “I’ve given advice to people I’ve mentored that if you are too focused on the next step, you are not going to do a very good job in the job you are in. And I’ve seen that over and over again. Get really, really, really good at the job you are in because if you are and you’ve mastered it, you will move from the next role to the next role to the next role, but if you look too far ahead, you probably won’t… People who seem to be really successful are great operators. They get in the business and understand the business.”

Be Comfortable With Ambiguity.
Said Smith, who, after 14 years of brand management and executive roles at Kraft Foods, was brought to Avon by Andrea Jung to help her transform the company: “We are all taught that great leaders set the strategy and then set everybody off marching. But, right now, nothing is more important than a general agile leader who is comfortable with ambiguity. Let’s face it - it is going to be a bumpy and fascinating ride. We need people who are nimble and agile in their thinking who are, to some degree, comfortable with figuring it out as they go along. We [at Avon] look for people who can handle change, who can handle the curve balls…understanding that you can’t possibly have it all figured out and being open to that. Also, people that can communicate and inspire. That’s always been important in leadership but now more than ever because you have to communicate and be really transparent and take people along on the journey, to say, ‘This is uncharted territory but this is where we are going.’” Sutton agreed, adding that even her job at Morgan Stanley, which was created for her, changed shortly after she joined the company. “What I was hired to do changed in 6 months and that shifted because the environment changed. [But it was OK because of] the belief I could make a difference.”

Think of Your Career as a Jungle Gym Rather Than a Ladder.
Moderator Pattie Sellers advised the audience of MBA women: “Don’t think of your career as a ladder, think of it as a jungle gym. If you think of it as a ladder, you won’t have the peripheral vision to enable you see the lateral opportunities and especially today when you don’t know what the hot job is going to be tomorrow. You’ve got to keep yourself open and you’ve got to swing to the opportunities that come along.” Smith agreed, “I believe the greatest plans are restrictive instead of instructive. Figure it out as you go along. The only guiding principle I’ve had is to insist that my life and work have passion and purpose. When I think about the pivotal jobs I took [like her move to Kraft’s Callard & Bowser-Suchard to handle the then-unknown Altoids brand for Kraft or the jump from being Group Vice President and President of the U.S. Beverages and Grocery Sectors in Kraft to Brand President for Avon], they really made no sense on paper.” She continued: “Just go into everything saying – I’m going to be inspired and I’m never going to settle and go where that takes you. ” And Sellers added, “I’m struck by women on the Fortune’s Most Powerful who’ve taken lateral moves or even taken downward moves because they wanted to expand their experiences. And that’s what pays off in the long term.”

The Tax Lady’s Guide to Beating the IRS, featured on WomenEntrepreneur.com

WomenEntrepreneur.com is publishing one of the chapters from my book, The Tax Lady's Guide to Beating the IRS and Saving Big Bucks on Your Taxes. How exciting! They are publishing Chapter 6, The New American Dream—Tax Tips for the Self Employed, in three parts. Below, please find the first two parts of the series. Be sure to click through the links below to read the full text, including charts and graphs!

Tax Tips for the Self-Employed

If you know what you're doing, you can avoid the pitfalls and leverage as many credits and deductions as possible.

Set Up a Tax-Friendly Business

Set your business up to take full advantage of the opportunities for tax avoidance--but beware of tax evasion.