IL Worker's Compensation Overview & Recommendation

Overview:

Illinois law requires employers to obtain workers' compensation insurance, but a small percentage of employers fail to comply. These employers enjoy an unfair competitive advantage over law-abiding companies, while leaving their employees vulnerable if accidents should occur. Under Section 4(d), an employer that knowingly and willfully fails to obtain insurance may be fined up to $500 for every day of noncompliance, with a minimum fine of $10,000. Corporate officers can be held personally liable if the company fails to pay the penalty.

You only need to have one employee to come under the WC Act. If you have one employee, even a part-time employee, you must obtain workers' compensation insurance.

An out-of-state company conducts business with its employees in Illinois, i.e., does any work at all in Illinois, even if all the workers reside in the same state as the company, that company must provide a workers' compensation insurance policy that includes Illinois coverage for those workers.

According to Section 1(b)2 of the Act, Illinois law covers

        - Persons whose employment results in injury within Illinois, or
        - Persons whose work is principally localized within Illinois, or
        - Persons whose contract of hire was made in Illinois. 

Recommendation:

XactPAY® is The Hartford's integrated payment service that calculates insurance premiums for a Hartford Workers' Compensation policy which amount is then withdrawn directly from your bank account every time you run payroll. Rather than paying for insurance up to a year in advance and tying up vital cash, premiums are paid as you go one payroll period at a time!

Your Hartford Workers' Compensation premiums will be based on actual payroll data which will:  

      
        - Eliminate large down payments

        - Eliminate finance and billing fees

        - Eliminate late fees

        - Eliminate the need to write checks

        - Potential to minimize audit adjustments

        - Allow for better cash flow management

To be eligible your small business must:

        - Meet The Hartford's underwriting guidelines
        - Purchase a WC policy from The Hartford
        - Run your payroll through one of our payroll service provider partners
        - Run payrolls on a regular, consistent basis
        - Have a checking account with EFT capabilities

Each time run your payroll, QuickBooks sends your payroll data to The Hartford. XactPAY® then calculates the Workers' Compensation premium for that payroll period based on the payroll processed. If you elect, The Hartford will provide notice to you of the amount and timing of each expected withdrawal from your bank account. The Hartford draws the premium payment for your Worker's Comp policy from your account based on your actual payroll data for the applicable period.

Getting a quote is simple, fast and effective. Just email or fax the following information to thughes@hughesgp.com

        - Company name
        - Company address
        - Type of entity ( Corp. , Partnership, Sole Prop.)
        - Number of employees
        - Average annual payroll
        - Type of business (Electrical, Gardening, Accounting)
        - Number of years in business
        - What type of payroll processing system currently being used

W9 Form - Are You Protected?

Did you know as a small business owner the IRS expects you to have a signed W9 on file from each vendor you do business with?  The W9 is a rather simple form that asks the vendor to provide the following to you:

• Name of Business
• Business Form - Sole Proprietor, LLC, Partnership, Corporation
• Exempt Status
• Address
• EIN/SSN as applicable
• Signature of company official

Each year end you will use the information provided on the W9 to determine whether you need to send a 1099 to the vendor along with a copy to the IRS. A 1099 for a vendor is like a W2 for an employee, it reports taxable income to the government.  Failure to issue 1099s can result in hefty fines and penalties from the IRS.

So, you may be asking yourself, "Why do I need this to be protected?"  The answer - by signing the W9 form your vendor is attesting to his or her tax status, and whether their payments from you need to be reported to the taxing authorities.  In essence, the W9 is your "proof" that you followed the appropriate process for tax reporting.  If the IRS audits you, they will look at your W9 forms to ensure you sent out correct 1099s. 

Occasionally, you will run into the vendor who puts up a fight and doesn't want to give you this information.  You can remind this individual of the penalties he or she can encounter for refusing to provide this information, but it's my personal opinion that you should probably just look for a different vendor.

Click on the below link to obtain a copy of the IRS W9 form.
http://www.irs.gov/pub/irs-pdf/fw9.pdf?portlet=3

Worker Classification - Employee Vs. Seasonal Employee Vs. Contractor

As a small business owner, you need to ensure you are correctly classifying the individuals who are performing services for your business.  Is the individual a contractor, an employee, or a seasonal employee? 

Many businesses attempt to classify workers as contractors in an attempt to avoid paying employment taxes to the federal and state governments.  In recent years the IRS has formed special teams to search for misclassified workers under the ETE (employment tax examination) program.  Failure to properly classify workers can result in hefty fine and penalty assessments by the IRS, sometimes as high as 35% of the tax bill.

Use the below outline to help guide staffing and classifciation decisions:      

EMPLOYEES:
The worker is hired to provide services to a company on a regular basis in exchange for compensation and the worker does not provide services as part of an independent business.
The candidate's responsibilities include:

1. Provide Form W-4
2. Provide proof of eligiblability to work in US
3. Report hours worked (required for hourly employees)
4. Comply with company’s employment policies
5. Perform all job responsibilities satisfactorily

The company's responsibilities include:

1. Pay agreed-upon compensation
2. Withhold payroll taxes from such compensation
3. Pay employer payroll taxes (7.65% of gross pay)
4. Provide fringe benefits 
5. Maintain non-discriminatory and safe work environment

SEASONAL EMPLOYEES:
The worker is hired for a short-term assignment, not to exceed 6 months, and the person doesn't provide services as part of an independent business.
The candidate's responsibilities include:

1. Provide Form W-4
2. Provide proof of eligiblability to work in US
3. Report hours worked (required for hourly employees)
4. Comply with company’s employment policies
5. Perform all job responsibilities satisfactorily

The company's responsibilities include:

1. Pay agreed-upon compensation
2. Withhold payroll taxes from such compensation
3. Pay employer payroll taxes (7.65% of gross pay)
4. Not required to provide fringe benefits
5. Maintain non-discriminatory and safe work environment

CONTRACTORS:
The worker is providing services as part of an independent business.  The person may be an employee of a third-party vendor (consulting firm or temp agency), or may work for their own company.  Addtitionally, the person seeks work as an independent company from multiple companies.
The candidate's responsibilities include:

1. Provide Form W-9
2. Provide invoices for services performed
3. As any third-party vendor, contractor is responsible for all taxes

The company's responsibilities include:

1. Company has the right to control or direct only the result of the work, not the means of accomplishing the result
2. Process invoice for payment and make timely payment
3. Pay vendors electronically via ACH, or by check
4. Provide Form 1099, if appropriate