It’s critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. If you have any doubts, contact a payroll service provider such as Manager’s Payroll for advice.

There are three categories of facts that provide evidence of the degree of control and independence:

1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

The consequences of making a misclassification mistake can be costly. If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker.

A flexible spending account offered through your employer, and administered by your payroll service, is a great fringe benefit that lets you pay medical and child-care expenses with pre-tax dollars.

Make sure you take full advantage of it when deciding how much to contribute — because the amount you can set aside for health-care expenses is now limited to $2,500, a rule change from the health-care law that took effect in 2013.

Another big change now permits some employers to allow employees to carry over $500 from one year to the next, although not all plans have made this change.

Here are 5 suggestions for using up your balance of available funds:

1. Prescription eyeglasses – use the pre-tax dollars from you FSA to cover the cost of quality frames, even if you don’t have a vision plan with your employer.
2. Orthodontics – flex plans can be used to cover the cost of braces for yourself or your kids.
3. Weight-loss programs – if prescribed by a doctor to treat obesity, the cost of this program can be reimbursed through your FSA.
4. Lasik and laser eye surgery
5. Also remember that the cost of all prescribed drugs can be reimbursed through your FSA.

If you offer a Sec. 125 cafeteria plan to your employees, take note that the IRS has expanded the permitted election rules for health coverage under this plan. Notice 2014-55 permits a cafeteria plan to allow an employee to revoke his or her election under an employer’s group health plan during a period of coverage in either of two situations in order to purchase a qualified health plan through an Exchange established under the Affordable Care Act. Consult the notice for a detailed explanation of the situations.

Like most business owners, you started your business with passion. Unfortunately, also like most owners, that passion tends to get lost somewhere along the way, usually about the time you find yourself mired down in complex administrative work…like payroll or employee issues. You should spend your workdays making your business successful, making it an industry leader, brainstorming and innovating new ideas. You shouldn’t waste time on back office tasks. Consider all the reasons why using a payroll service is your best option…

Outsourcing payroll preserves your time – Not only do you have to stay up to date on ever changing IRS and state revenue regulations, but processing payroll also takes a great deal of time—all of which take your focus off your core business.

Save money and be compliant – It takes concentration to stay current on ever-changing mandates and software updates. It’s always best to leave payroll compliance to the experts, so you can avoid penalties and fees.

Eliminate employee complaints – Have you ever had trouble paying your employees on time? Did you make a mistake that you have to go back and correct? These issues can be avoided by using a payroll service provider.

Keep yourself in business – Don’t waste anymore time trying becoming an expert payroll processor. Get back to your passion; get back to your business.

We find many errors on form W4 from our client’s employees. Some require the form to be redone, while other mistakes are probably costing the employee undue hardship with income tax owed at the end of the year. Here’s a few tips to consider:

1. How do I know if I’m exempt from withholding? You can take a pass on withholding if you owed no tax last year and expect to owe nothing this year, either. (This means zero tax liability for the year, not whether you owe tax or get a refund when you file.) The reality is that very few employees are exempt.
2. How do allowances work? The number of allowances you claim controls how much will be withheld from your paycheck. The more you claim, the less money that is withheld; the fewer, the more of your salary is sent off to the IRS. Choose wisely because you could be penalized for grossly exaggerating your allowances to avoid payroll tax.
3. Married couples should consider the total number of allowances between them, and then divide this by two. Otherwise they are bound to face a larger than expected tax bill at year’s end.
4. A new W4 should be filled out when you get married, divorced, have a baby, start a new job, or if you receive a very large tax refund, or end up owing a significant amount.