Issue link: https://www.massageandbodyworkdigital.com/i/68173
BUSINESS SIDE Employee or Independent? It is unfortunate in our profession, but many employers take advantage of people they have classifi ed as independent contractors. Usually they don't want the responsibility of the paperwork or the mandatory income withholding, but these therapists should really be considered employees. The IRS uses three defi ning characteristics to determine which category a worker falls into: behavioral control, fi nancial control, and the type of relationship. For example, if your employer expects you to sit at the spa all day whether you have clients or not, you are an employee. If you are not being paid wages, on top of the percentage or fl at rate you receive for performing massage, but you are expected to mop the fl oors, clean the windows, or work the reception desk in your downtime, you are an employee. IRS Form SS-8, Independent Contractor or Employee, is available on www.irs.gov and can be used to check your status, if there is any doubt of how you should be classifi ed. Employers who violate the rules regarding classifi cation of employees are subject to back taxes and stiff penalties. THE SELF-EMPLOYED Your tax liability and personal liability—for example in the event of bankruptcy—can be affected by the business structure you choose. There are four common types of business structures: sole proprietorships, partnerships, corporations, and limited liability companies (LLCs). Additionally, there are several different types of corporations. While your state laws can control the way your business should be set up, federal laws control how you are taxed. If you're unsure of which structure you should choose when starting your business, it's wise to consult a fi nancial planner or tax advisor. Note: it's diffi cult to change from one structure to another once you have chosen how to set up your business. A sole proprietorship is the most common type of business organization, and is usually the easiest way to go for a one-person operation or a home-based business, although it can also work for businesses with lots of employees. Sole proprietors should report deductions and income on Schedule C, as mentioned above. One caveat to being a sole proprietor: protection of personal assets is not one of the perks of being in business. The owner is held personally liable for all obligations such as debts and taxes of the business. Just like an independent contractor, any self-employed person is responsible for his own self-employment tax and any additional income tax resulting from the profi ts of the business. A partnership is a business arrangement between two or more partners. For tax purposes, the partnership as a company is not subject to tax; the profi t or loss is passed on to the partners who are obligated to fi le a Schedule K-1, Partner's Share of Income, Deductions, Credits. No tax is withheld from income distributions to partners, and each partner is liable for his own self-employment tax and connect with your colleagues on massageprofessionals.com 23