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Worker classification crackdown coming

Wednesday, October 26th, 2011

The IRS recently announced a voluntary worker classification program that provides amnesty from back payroll taxes and penalties for companies who reclassify their independent contractors into employees. While there may be advantages on the federal tax side of this issue, you must consider other factors before deciding on a course of action. Worker classification has been a tricky, murky issue for many years. We will explore several aspects of this issue in future posts, including:

  • Deciding whether your workers truly are independent contractors or employees;
  • Protection from reclassification under Internal Revenue Code Section 530 or other precedents;
  • Consequences at the state level of voluntary disclosure to the IRS;
  • Related legal issues such as worker response to reclassification (e.g., retroactive reclassification to apply labor laws and collect overtime pay);
  • Potential consequences from other government agencies such as the Department of Labor.

As we have seen before, a voluntary disclosure program is a harbinger of increased enforcement action in this long-contested area of business law. This makes it more important than ever for you to seek consultation from a knowledgeable professional. It is not an overstatement to say that this issue  could bring your company to its knees. Unfortunately, we have seen it happen to smart, well-meaning business owners. Contact us today for a detailed analysis of your company’s exposure to the coming worker classification crackdown.

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Tags: asset protection, business consulting, independent contractor, payroll, small business, tax, tax audit, withholding

2 thoughts on “Worker classification crackdown coming”
  1. Pingback: New 1099 trap | Van Elkins & Associates, CPAs
  2. Pingback: Employees paid as independent contractors | Van Elkins & Associates, CPAs

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