Easy LLC Tax Question

[BusinessMatt]

Question regarding LLC taxes:
My company will be offering $20 to anyone who can successfully refer an individual to my websites services. I don't want to consider the people who make the referral employees; I only want to award them the $20.

How exactly do I handle this in regards to taxes? What is that technically called? Is this the best way to approach this situation?

P.S. My business is set up under a NC LLC.

Thank you in advance!
Matt Cimino

 

[WebJunkie]

Question regarding LLC taxes:
My company will be offering $20 to anyone who can successfully refer an individual to my websites services. I don't want to consider the people who make the referral employees; I only want to award them the $20.

How exactly do I handle this in regards to taxes? What is that technically called? Is this the best way to approach this situation?

P.S. My business is set up under a NC LLC.

Thank you in advance!
Matt Cimino

I would assume once you hit a certain $$ amount you may need to count them as an indipendant contractor. You would be best to ask your CPA or business attorney though.

 

[prometheus399]

My tax experience is a bit dated but there used to be a set of guidelines issued by the IRS to help taxpayers with the tricky definition of an employee.

The definition seemed to turn on the degree of control you exercised over the timing and manner in which they executed their duties. The more independent they were, the less likely they woud be considered employees.

In this case it seems fairly unlikley that you are establishing and employer-employee relationship with those who take up your offer (unless perhaps some particularly enterprising individual starts earning a substantial number of referral commisions).

I suspect you may not even have any reporting requirements at all as the very general rule _used to be_ that if you paid someone less than $600 per annum you were exempt from reporting requirements (i.e., you did not have to file a 1099).

These are just my thoughts. You should verify before placing any reliance in them.