Provided by: Healthcare Accountant Bryan Koshers, June 23, 2010
Jennifer, thank you for bringing this topic to the discussion table. Not only is the Department of Labor looking deeper into the books of employers, so is the IRS. A few items that both agencies are putting under the microscope are:
Employee vs. Independent Contractor classification
Many factors come into play when determining the correct worker classification such as control, hours, experience, licensure and flexibility to name a few. More often then not, the IRS will rule an employee status is appropriate, so for those who have independent contractors, please review if appropriate and document as much as possible.
Officer Compensation vs. Profit Distributions
This conversation only applies to S-Corporations and how a business owner needs to determine if the officer is receiving fair and reasonable compensation for his/her services. Far too often, business owners don’t take enough salary and avoid paying payroll taxes on that income. To determine a fair salary, consider what you would pay to have an associate fill your clinical role and use that pay scale.
Expense Reimbursement and Benefits
The IRS has discussed increasing their focus on non-taxable reimbursements of business expenses to consider if these costs are reasonable and customary business expenses. Please be sure to retain the appropriate backup such as receipts and stated business purpose in order to defend these positions under scrutiny.
Be advised, if an audit does occur, you should seek the advice of a CPA experienced in such audits and not attempt to handle the audit yourself.
To contact Bryan to discuss an internal review, proactive planning, consulting or general accounting questions or representation call (516) 481-1515 or email Bryan@koshersco.com. Bryan Koshers is a partner at Koshers & Company, CPA's, a New York City and Long Island based healthcare accounting firm.
For additional information on this topic, contact Jennifer Kirschenbaum at (516)-747-6700 ext. 302 or at Jennifer@Kirschenbaumesq.com.
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