Federal Minimum Wage Increase.

Effective May 25, 2007 the Fair Minimum Wage Act of 2007 increases the federal minimum wage rate to:

     $ 5.85, effective July 24, 2007

     $ 6.55, effective July 24, 2008

     $ 7.25, effective July 24, 2009

Many States also have minimum wage laws so these should be checked as needed.  Remember the States of Alabama, Louisiana, Mississippi, South Carolina and Tennessee do not have minimum wage laws.

IRS and States Are Payroll Pals

An intensive campaign has been launched (it's really been an on-going effort but now it is being extensively advertised) to crack down on employers payroll tax violations.

The biggest culprit:  Independent Contractors.  The second culprit:  under the table cash payments (undergound economy) and not reporting these payments to the respective State or IRS.

It is probably fair to say that the States and IRS do not think that anyone can be an independent contractor because in their thinking there is always some type of control.  Since there is "control", the relationship is one of an employer and employee.

Figuring out an employee versus an independent contractor can be very tricky and the rules to clarify the distinction is of little help to many employers.

But the bottom line in-so-far as the various State and IRS agencies are concern is "if you can control what will be done and how it is done" then the individual is an employee.  If there is a control of the details of how a service is performed the individual is an employee.

That being the case Social Security, Medi-Care, Unemployment and other related taxes must be withheld by the employer.  And if the individual is reclassified as an employee, the employer risks having to pay all the back taxes, penalty and interest on what is determined to be back wages.