Assignment on Analysis on Income Tax, Deductions & Employee
Added on 2020-04-07
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TAXATIONAnalysis on Income Tax, Deductions &Employee/Independent Contractual RelationshipContrast for Tax Purposes.Students' NameCourse Title Instructor’s NameInstitutional AffiliationCity and State Date of Submission
TAXATIONQuestion 1(a)An employees is defined to be that person hired and tasked to work on certain cores asper agreed employment terms for economic benefit of the employer whereas and independentcontractor is that person who works with the principal on contractual basis and is not bound to any labour laws but is liable to any contractual agreement set in place. The below notes explains in detail the parallel distinction of an employee and independent contractor;1. An employee relation exists; if there is written employment agreement between the employer and employee if there is minimum expected benefit and entitlementsOf wage and salary and finally if there exist holidays, offs and leave days entitlements.2. Independent contractual relation on the other hand likewise exists on the grounds that they are self-employed hence eligibility to earnings upon invoicing the principal on the goods/services rendered. Independent contractors are not covered by any labour/employment laws whatsoever thus allowing the civil law determine their rights as based on the ruling made on case study of Ace Insurance Vs Trifunovski. By virtue of being self-employed, theyare their own boss hence can choose when to work and when thus not, entitled to annual or sick leave.It’s prudent to likewise note that this relation is next to zero on basis of choice thus noone chooses preferable relation but nature does it on their behalf. The reason as to why the choice of preferable relation does not exist is because there are no options of foregoing tax requirements as well as employment entitlement willingly instead all this happens as a matter of chance. William by nature of his work he is bounded by a contractual agreement that dictates the principal expectation as he conducts his service from dressing code to interrelation with the
TAXATIONstudents as well as expected general rules. Just like any other independent contractor Williamis not entitled to any sick leave, holiday pay or any other entitlement twain (Pg.3). IRD case explains that a member who operates as an independent contractor is allowed to work freely for any other organizations at own free time without notifying the principal in any case he is allowed to be paid for the number of hours he worked for the principal. It’s from this clause that we are able to define William as an independent contractor he is allowed to work at his own time and for any firm as well as being paid for the exact number of hours he works. Although Williams relation seems to strongly lie on the contractual site, the tasks on provision of equipment’s by the organisation slightly makes him to be partly employee since it is expected as an independent contractor to use his own tools and equipment however we can assume that the tools were given in good faith and as per the contractual agreements set in place that defines general gross conduct and expectation. Leave or duck test, intention relation test and that of economic reality strongly makes William an independent contractor since he is entitled to terminate the agreement anytime he wishes to, is eligible to an invoice of $50000 payment of the number of hours he worked and finally his contractual relationship is that described by the nature of his job rather than preferable choice. (b)The employee verses independent contractor is of great pivotal importance to state and parties especially when it comes to the statutory tax obligation. Whereby the state via tax department is able to experience smooth tax planning and follow-ups while the parties are given access conducive environment of operation free from penalties and prosecution.For tax purposes, an employer on behalf of the employee is expected to submit and pay PAYE deduction to the Inland Revenue Department as statutory and mandatory failure to which there may exist penalties, impairment of company goodwill or rather reputation and the worst of all operation closure.
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