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Can I hire employees as independent contractors to save money on taxes in Mississippi? What are the requirements?

Based on the information provided in the context documents, it is not recommended to hire employees as independent contractors to save money on taxes in Mississippi.

Requirements for Withholding Taxes

Mississippi law requires employers to withhold taxes from employees’ wages [1.1][2.1]. This means that if you hire employees as independent contractors, you would not be withholding taxes from their wages, which could result in penalties and fines.

Definition of Independent Contractors

Mississippi law defines independent contractors as individuals who are free from control and direction in the performance of their work, both under their contract of hire and in fact [1.1][2.3]. If you are hiring individuals as independent contractors but are controlling and directing their work, they may be considered employees under Mississippi law, and you would be required to withhold taxes from their wages.

Penalties for Misclassifying Employees

Misclassifying employees as independent contractors can result in penalties and fines. The Mississippi Department of Employment Security may assess a penalty of up to $1,000 per misclassified employee for a first offense, and up to $5,000 per misclassified employee for subsequent offenses [1.1].

Therefore, it is recommended that you consult with a legal or tax professional before hiring employees as independent contractors in Mississippi to ensure compliance with state laws and regulations. Additionally, Mississippi offers a manufacturing investment tax credit for manufacturing enterprises that have operated in Mississippi for not less than two years [3.1].

[1.1]: MSCO 27-7-305 [2.1]: 35 MSAC Part 3 Chapter 09, Chapter 09 [3.1]: MSCO 27-7-22.30 [2.3]: Chapter 08, 35 MSAC Part 3 Chapter 08

Source(s):
Jurisdiction

Mississippi