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Taxation of Virtual Workers: Expert in Tax Education

Learn about the different types of virtual workers and the taxation rules that apply to them. Presented by XXXX and developed by William E. Rogers, MBA, CFP, EA. Summer 2014.

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Taxation of Virtual Workers: Expert in Tax Education

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  1. Taxation of Virtual Workers The Expert in Tax Education

  2. Taxation of Virtual Workers Presented by XXXX Developed by William E. Rogers, MBA, CFP, EA Summer 2014 The Expert in Tax Education

  3. Part I Types of Virtual Workers

  4. The Emergence of Telecommuting Source: Telework Research Network

  5. Telecommuters • Service Providers • Outsourcing Providers Types of Virtual Workers

  6. Telecommuters are workers who perform a portion of their duties from home. What are Telecommuters?

  7. Are TelecommutersReally Employees orIndependent Contractors?

  8. Rev Rule 87-41 establishes a 20 factor in determining a worker’s status • The test is not a simple yes / no questionnaire • It focuses on three issues to determine the degree of control and independence in the relationship: • Behavioral Control • Financial Control • Type of Relationship IRS 20 Factor Test

  9. A service provider is a worker that attempts to work with more than one employer at a time. What is a Service Provider?

  10. Construction workers, salespeople and consultants are frequently misclassified as independent contractors • For a consultant to be considered an independent contractor: • Possess a specialized skill • Provide a resource • Dictate, how, when, and what is used on the job • Offer his or her services to more than one client Service Providers as Independent Contractors

  11. A growing number of employers are requiring employees to set up their own corporation or LLC • The purpose is to re-hire the employee as an independent contractor in order to avoid paying on behalf of the employee any: • Benefits • Insurance • Payroll taxes • Worker’s comp Practitioners Beware!

  12. A business that takes over an entire process or function on behalf of another company. What are Outsourcing Providers?

  13. Part II Out of State & Overseas Worker Issues

  14. Some states use the “convenience of the employer” rule when taxing a worker • This rule states that a worker is subject to tax on his or her income in the home state of the employer • Currently, Delaware, Nebraska, New York, and Pennsylvania, use the convenience of the employer rule • So far, New York is the only state to attempt to enforce it aggressively What are Telecommuting Taxes?

  15. Maintaining an employee in another state also establishes a nexus for state tax purposes to that state • This means that the employer will now be subject to all applicable state and local taxes: • Income • Sales & Use • Payroll • Property Employer Multi-State Tax Issues

  16. Workers From Around the Globe

  17. Expatriates • U.S. citizens who live and work abroad • Foreign nationals • Treated as nonresident alien for U.S. tax purposes Types of Overseas Virtual Workers

  18. When is a Foreign National’s Income Subject to Backup Withholding? • When it is effectively connected to the U.S. • It is deemed effectively connected to the U.S. when the services are performed in the U.S. • See IRS Pubs 515 & 519 for more information

  19. QUESTIONS???

  20. Presentation developed byWilliam E. Rogers, MBA, CFP, EA William E. Rogers, MBA, CFP, EA is the founder of Ascend Business Advisory, a boutique tax and financial advisory firm in San Diego, California. He holds a BS in Business Management from the University of Redlands, an MBA from the University of Southern California, and an MS in Finance from Golden Gate University. His practice specializes in the needs of entrepreneurial start-up companies.

  21. NAEA created this educational program as part of its firm commitment to providing up-to-date, convenient continuing education that focuses on the issues that members identify as top priorities. Members are invited to suggest further areas of study or to submit presentations by contacting hjones@naea.org. National Association of Enrolled Agents 1730 Rhode Island Ave, NW Ste 400 Washington, DC 20036 Toll free: 855-880-NAEA www.naea.org

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