Managing the Telecommuting Employee by Michael Amigoni & Sandra Gurvis

Author:Michael Amigoni & Sandra Gurvis
Language: eng
Format: epub
Tags: ebook, book
Publisher: Adams Media, Inc.
Published: 2009-07-15T00:00:00+00:00

401(k) Plan. Here the employee defers part of his current income, with a limit of 25 percent or $30,000, into a tax shelter where it grows tax-free until he withdraws it. In some cases, the employer matches the employee’s contributions. The beauty of this plan is that it allows an employee to save for retirement and simultaneously reduce her current income tax bill. Employees can also make decisions as to the investment of these funds.

Defined Benefit Pension Plan: This traditional pension plan pays workers a specific monthly benefit at retirement, either by stating it as an exact dollar amount or a specific formula that calculates the benefit. Generally, the company funds the pension plan, and a professional money manager invests the assets of the fund.

Qualified Retirement Plan: A qualified retirement plan is established by a business and includes profit sharing, defined benefits, and money purchase pensions. Employees’ contributions to a qualified plan are not taxed until they withdraw the money. In addition, any contributions made to the plan on the worker’s behalf by the employer are tax deductible.

Regardless of their status, all employee contributions to retirement plans are subject to protection under law (see sidebar).

There’s Something about ERISA

The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets of millions of Americans so that funds placed in retirement plans during their working lives will be there when they retire. ERISA is a federal law that sets minimum standards for pension plans in private industry. Most of the provisions of ERISA are effective for plan years beginning on or after January 1, 1975.

However, ERISA does not require any employer to establish a pension plan. It only requires that those who do establish plans must meet certain minimum standards. The law generally does not specify how much money a participant must be paid as a benefit.

TAXES: WHO PAYS AND WHO FILES (IC VS. W-2)

Taxes for telecommuters can be complicated for both worker and employer. Let’s face it: Most of us don’t even want to think about taxes.

For the workers themselves, and this applies whether they are W-2 workers or independent contractors, along with keeping records on monies received and reimbursed expenses (backed up with check stubs and receipts), they should keep and maintain thorough records of all expenditures, even if it means throwing them in a box and handing them over to an accountant on April 14. They must also fill W-2 forms or, if they’re independent contractors, 1099s, of which there may be several if they are working for different companies. You, as an employer, are responsible for making sure contractors receive 1099s if they earn over $600 a year.

Another issue facing telecommuters is whether their home office qualifies for a deduction. If the primary place where they conduct business is the company office or a telework center, they may not meet the criteria. The business part of the home must be the principal place where workers meet or deal with patients, clients, or customers. However, even if the worker’s home office does not qualify, she can still deduct all legitimate business expenses.

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