Practically Speaking is a weekly column that addresses your most pressing business dilemmas. The advice is the opinion of long-time business owner Gene Marks. Send your questions to PracticallySpeaking@fortune.com.
I’ve been interviewing candidates for a sales position and just found a great guy. He’s experienced, well-spoken and would fit in with our existing team. I was about to offer him the position when he revealed to me that he has a very serious illness and would likely be missing work to undergo treatment. Now I’m concerned. Do I hire him, knowing that he could be missing work, which would be a drain on productivity for my small company and potentially increase my health insurance costs?
People get sick. And when it happens to an existing employee, particularly if it’s serious, then of course you’re going to be there for him. In fact, one of the biggest benefits of working at a small business is that it’s like family. And oftentimes I’ve seen my clients go above and beyond written policy or even insurance coverage to help a sick employee out with more time off and a few extra dollars to tide them over. But this is different. This is someone who is known to be seriously ill before he’s even hired.
For starters, discrimination is against the law. You can’t turn down someone for a job because of an illness unless you can prove that his illness would stop him from performing his job. And don’t jump to conclusions about your health insurance either – because of new rules passed that prohibit insurers from denying coverage due to pre-existing conditions, experience ratings have changed in these days of the Affordable Care Act to include regional and industry factors which means that hiring a sick employee may not have as big an impact on your premiums as you may think. In the end you’ve got to weigh the investment you’d need to make in this new employee (cost and productivity) vs. the return he may be able to provide as an experienced and successful salesperson. And if you feel that the cost is too high you’re going to have to come up with a solid reason for turning him down and documenting why the candidate you did hire is more qualified for the job.
Yes, I charge some personal items through to my business. Who’s going to know, right? And even if I get caught, it’s all in very small dollar amounts. Is this such a big deal?
My firm has about 600 clients and the vast majority of them do this, so you’re not alone. People like to cut corners with their personal expenses. They say “hey this is the perk of having your own business.” They enjoy getting a tax benefit from deducting something on their business return that they know they wouldn’t be able to deduct on their personal return. Some go to extremes – I once had a client who charged a $25,000 piece of jewelry for his wife as an “office expense.” But most just cut corners – a meal here and there. A vacation with the family.
But, regardless of the amount, it’s just a bad idea. Sure, the chances of you being audited by the IRS are pretty slim. And even if you are chosen you might get a friendly auditor too who passes over these little infidelities. But you’re playing a game. And if you get caught you’ll suffer in two ways. First, regardless of the amounts, passing through obvious personal expenses as a business expense is disingenuous and a competent auditor will call your ethics and judgment into question. He will believe your stories less – and you may be needing him in your corner when it comes time to look at the big ticket items he’s auditing. Business is about trust and playing games like this does not exactly help build that trust. But the more important reason? Jail. A tenacious auditor might want to make an example out of you. And knowingly charging personal expenses through as business expenses is fraud. And criminal.
Are the few dollars you’re saving really worth it? I know it seems like everyone does it. But since when are you everyone? Separate your business and personal. Sleep well. And instead of spending time scheming up ways to avoid taxes focus your energies on growing your business and making more money.