Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
IRS Clamps Down on Companies that Misclassify Workers
Author: Scarinci Hollenbeck, LLC
Date: March 22, 2013
Key Contacts
Back
Tax season is officially here, and business owners with independent contractors and employees should not misclassify workers to avoid attracting the ire of the Internal Revenue Service.
In an effort to close the tax gap and ensure full compliance with federal tax law, the IRS is focusing more closely on business tax returns and, specifically, the way in which companies classify workers. The agency has been cracking down on businesses that misclassify workers as independent contractors rather than employees, and the penalties for doing so can be steep. In many cases, hiring independent workers can be more cost-effective for companies. Companies are not required to withdraw payroll, Social Security and Medicare taxes, provide benefits or pay unemployment insurance. However, if the IRS determines that employers have incorrectly labeled workers, they may be forced to pay up to 100 percent in payroll taxes owed to the IRS, according to Fox Business.
Currently, the IRS has audited or is in the process of auditing 6,000 companies in the crackdown mission, the news source reports. The IRS estimates that at least 30 percent of workers are currently misclassified, and resolving this issue could yield as much as $7 billion in revenue, Fox Business adds.
Because the IRS has a strong financial incentive in cracking down on misclassified workers, it’s important that companies know the difference between who qualifies as a contractor versus and employee. For example, workers who set their own schedules, utilize their own tools to complete a job and provide services to other businesses are generally classified as independent contractors and should be issued 1099 forms, rather than W-2s. However, when companies control or have the right to control what the worker does and how the worker does his or her job, as well as how they paid, the hours they work and the benefits they receive, individuals may fall under the employee classification.
- Practices: Corporate Transactions & Business, Tax and Trusts & Estates
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
A Whistleblower Just Filed a Complaint Against Your Company: Here's What to Do Now
Few situations create more uncertainty than learning that an employee has filed a whistleblower complaint. Questions arise immediately: Is the allegation legitimate? Should the employee be placed on leave? Do we need to notify our insurance carrier? Are we now prevented from disciplining the employee if there are unrelated ongoing work related issues? There is […]
Author: Sean M. Pena
Assignment for the Benefit of Creditors: An Alternative to Bankruptcy for Distressed Businesses
When a business reaches the point where it can no longer service its debts or otherwise resolve its liabilities, management is often faced with a difficult question: is a bankruptcy filing necessary or is there another way to perform an orderly liquidation or sale of the business assets? While Chapters 7 and 11 of the […]
Author: John D. Giampolo
Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know
For many years, the New Jersey Mansion Tax has been a significant consideration in high-value real estate transactions. Recent legislative changes, however, have substantially altered how the tax operates, including who is responsible for paying it and the amount owed in certain transactions. Whether you are purchasing, selling, or investing in New Jersey real estate, […]
Author: George McGowan
Estate Planning for Digital Assets Under New Jersey Law
As our personal and financial lives increasingly move online, estate planning must evolve to address a new category of property: digital assets. From email accounts and social media profiles to cryptocurrency and cloud-stored business records, these assets often carry both financial and sentimental value. Yet, without proper planning, they can become inaccessible—or even lost—upon incapacity […]
Author: Marc J. Comer
The Role of Representation and Warranty Insurance in M&A Transactions
In today’s mergers and acquisitions market, representation and warranty (R&W) insurance has become a common feature of deal negotiations. Once used primarily in larger transactions, R&W insurance is now frequently incorporated into middle-market deals as buyers and sellers look for efficient ways to allocate risk and close deals. When structured properly, R&W insurance can help […]
Author: George McGowan
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?
Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
Author: Sean M. Pena
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.