DEALER DIGEST Opportunity to correct worker misclassification Classifying workers as independent contractors rather than employees can provide dealerships with a number of benefits, including payroll tax savings. But if you treat someone as an independent contractor who, under IRS rules, should be treated as an employee, you become vulnerable to substantial back taxes, interest and penalties. The good news is that, if you’ve mistakenly classified some workers as independent contractors, you now have the chance to reclassify them as employees for future tax periods without getting a large IRS bill. Your liability for past payroll tax due can be reduced to only a minimal payment as part of the IRS’s new Voluntary Classification Settlement Program (VCSP). organization’s most valuable asset. This disconnect isn’t too surprising, given that only 13% of respondents thought a disaster could happen to them. The most popular reason given for lacking a disaster plan was “I haven’t thought about it” (59%). Maybe it’s time to give thought to a plan for saving data at your dealership.

n Cell phone use not taxable The break, however, isn’t available if you’re already under audit by the IRS or under audit for the classification of workers by the Department of Labor or a state agency. For more on program eligibility requirements and the IRS rules on classifying workers, consult your tax advisor. n If you provide employees with a cell phone for business, they likely no longer need to declare the value of their personal use of the cell phone as taxable income, according to new IRS guidance.

The phone must not be used as part of a compensation package or as a way to attract new employees or boost morale. It must be provided for specific business reasons, such as: Is your data prepared for a natural disaster? o  ou require that certain employees on Y their days off be available to, for example, answer urgent customer questions or provide input during a deal, or If you’re like the majority of business owners responding to a recent survey, the answer is “no.” The survey, recently conducted by Carbonite, a provider of online backup solutions, revealed that 57% of respondents lacked a disaster preparedness plan for business data — even though 81% believed that data was their o  ou need to be able to contact certain Y employees at any time for work-related emergencies, such as missing inventory or a customer or employee injury. IRS Notice 2011-72 and a related field audit memo, dated Sept. 14, also provide guidance on the reimbursement of the cell phone cost when the employee provides the phone.

n This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use. ©2011 DLRjf12 7 .