Business FinancesQuestion 286 of 690
A contractor classifies an independent subcontractor as an employee by mistake (or the reverse). The MOST significant financial risk of misclassifying a worker is:
a.A reduction in the contractor's bonding capacity
b.Liability for back payroll taxes, penalties, and interest
c.Loss of the contractor's business name registration
d.An automatic increase in materials costs
Explanation
Worker misclassification can make the contractor liable for unpaid payroll taxes (Social Security, Medicare, unemployment) plus penalties and interest, and can also trigger workers' compensation and labor-law exposure.
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Related questions on this topic
- A contractor is hiring its first employee. Which federal identification number must the business obtain from the IRS to report payroll taxes?
- An employee's gross wages for a pay period are $2,000. Using the combined employee FICA rate of 7.65% (Social Security 6.2% plus Medicare 1.45%), how much is withheld from the paycheck for FICA?
- Which payroll tax is paid entirely by the EMPLOYER and never withheld from an employee's wages?
- A self-employed contractor operating as a sole proprietor with no withholding generally must make federal income tax payments to the IRS:
- How frequently a contractor must deposit withheld federal payroll taxes with the IRS is determined primarily by:
- Under the cash basis of accounting, a contractor records revenue when:
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