Accounting Articles > Daycare and Nursery Schools:

Independent contractors in the daycare and nursery school industry

One of the newer types of audits that we have been handling is the federal payroll tax only audit.

This is something that we had never seen before. Normally when the Internal Revenue Service comes in, they look at all of the types of tax that they collect, both income and payroll tax.

We have a south side nursery school client that we had begun working for in the middle of a particular tax year. The first thing we noticed was that the teachers at the facilities were being treated as independent contractors rather than employees. We switched everyone over, in the middle of the tax year to an employee status. The applicable payroll taxes were withheld and remitted to the various taxation agencies. We completed and filed the income tax returns for the year.

Three years later we received an audit notice on this client which was for payroll taxes only. When I sat down with the auditor I was told that he was part of a unit at the Internal Revenue Service where payroll tax auditing was the only thing that they handled. We were successful in limiting the time period of the audit. They only looked at the one year rather than going back the three that remained in the statute. We were also successful in making sure that this didn't open up into an income tax audit as well. Once the auditor looked at our income tax work, they didn't want to waste their time.

But here's the point. If you have teachers, assistants, care takers, custodians or bus drivers working directly for you rather than another corporation or entity, and you are treating them as independent contractors, you need to call our offices today. You could be opening yourself up to all sorts of problems. As highly recommended CPA's and EA's in Chicago with years of experience in the Daycare and Nursery School Industry, we have been solving these types of problems for many years. Don't try to handle this by yourself. Call our industry professionals at (773) 267-7500 today. Our experience and easy to implement solutions, if handled properly, will protect you. Dealing with this yourself is just too dangerous. The Special Accounting Packages section of this page may have what you need. Whether you have a new business, an audit, need returns filed, or just a second opinion, we can help. Call or e-mail Accounting Solutions today.