Virtual Assistants

"Chuck" wrote

You mean like tele-commuters. People who work from home, hundreds or thousands of miles away? More than likely employees. Facts and circumstances always apply though. If they were an integral part of your business, then they would lean toward employee status. If the services they were providing weren't typical of the business operations, say someone doing marketing for a CPA firm, then that may lean toward them being self-employed contractor of the business.

payroll taxes". I'm certainly skeptical, and would always fall back on the IRS rules plus my own experience, but seek insight into other thoughts about this.

Self-employed individuals are not subject to payroll taxes (social security & medicare tax withheld from one's pay). Self-employed individuals are subject to self-employment tax on their net earnings. Self-employed individuals pay the employee share (an amount equivalent to payroll taxes) and they pay the matching employer share.

In 2012, the SE tax rate is 13.3% (10.4% for Social Security and 2.9% for Medicare). This reflects the 2% "holiday". In 2013, the rate reverts back to 15.3% (12.4% for Social Security and 2.9% for Medicare). An employee in 2013 would pay payroll tax of 7.65% (6.2% for Social Security and 1.45% for Medicare).

For more information see:

Aren't payroll tax and SE tax the same thing?

Also there is a cap on how much income the SS tax is levied. That cap is around 110k.

Only in the sense that they reflect fica and medicare taxes. Payroll taxes are the responsibility of the employer to remit. Self-employment taxes are the responsibilty of the individual contractor or business owner. "Payroll tax" will always be used in the context of the amount withheld from an employee's wages or the matching amount that the employer also remits. It is never used in the context of a self-employed individual.

Was there a recapture provision for the payroll tax holiday? My understanding is that if you made more than the social security wage base for the first 2 months (ie. more than 18350), then you would have to pay 2% of the excess when you file your 2012 1040 return. This is called recapture, and is a way of means testing the payroll tax holiday. Is that provision still there?

yes.

Asking a question here - when I read "virtual assistant" I imagine the Philippine or India-based workers who are working through a third party, i.e. if hired, one may not actually get full details, all work and payments are done online with the third party acting as intermediary. Does that change the nature of the relationship and whether any tax considerations need to be addressed?