Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
Report: Companies Failing at Worker Classification
Author: Scarinci Hollenbeck, LLC
Date: August 14, 2013
Key Contacts
Back
A large number of small, mid-market, and large companies nationwide are failing to comply with the Internal Revenue Service rules that govern worker classification status, a new report reveals.
The Treasury Inspector General for Tax Administration, looking to ensure tax compliance, released new findings that show many companies who continue to misclassify employees as independent contractors. This malpractice then leaves them open to audits, penalties, and fines. The agency came to this conclusion after investigating an SS-8 program, which allows workers and employers to request a determination letter from the IRS saying whether a worker should be classified as an employee or independent contractor.
After examining more than 5,300 cases in which the IRS deemed a worker to be an employee, the agency found that only 17 percent of employers “appeared to comply with the ruling and issued one or more W-2 forms to their workers during tax years 2008 through 2010.”
In addition, 19 percent “appeared not to have complied with the determinations and issued a form 1099-MISC instead of a form W-2 to their workers for tax year 2008, 2009, and/or 2010.” Meanwhile, 65 percent did not issue a form 1099-MISC or W-2 to their workers, meaning that these workers were either no longer employed by the company or may have been paid under the table.
There are several reasons for which companies may want to classify employees as independent contractors. Under the contractor status, employers are not required to provide benefits coverage or withhold income. Further, companies are shielded from paying worker’s compensation coverage as well as payroll taxes.
However, employers who misclassify workers as contractors to save money may face steep penalties for doing so. In addition to suffering reputational damage, these tax law violations may also levy penalties and interest and the payment of back taxes owed to the IRS. Finally, companies may be forced to reimburse workers for wages that should have been paid under the Fair Labor Standards Act, including overtime and minimum wages, and benefits afforded regular employees.
- Practices: Tax and Trusts & Estates, Corporate Transactions & Business
- 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
Genesis Mission: How the U.S. Government’s New AI Platform Will Reshape Corporate Innovation, Risk, and Competition
The federal government has launched one of the most ambitious scientific initiatives in decades, and it will redefine how companies develop technology, manage risk, and compete. The Genesis Mission, created by Executive Order and driven by the Department of Energy (“DOE”), is intended to accelerate scientific discovery through a national AI platform that links supercomputers, […]
Author: Michael J. Sheppeard
Stablecoins and the GENIUS Act: How New Global Rules Are Reshaping Compliance
Stablecoins Leave the Grey Zone Stablecoins were supposed to be the “boring” part of crypto: digital dollars that just work. Yet for years they have lived in a regulatory no-man’s-land, classified one day as securities, the next as commodities, and sometimes as something regulators had not even named yet. That uncertainty is finally starting to […]
Author: Bryce S. Robins
Don’t Overlook the Importance of Business License Management
If you operate a business without the proper license, you risk fines, insurance issues, reputational harm, and even business closure. Even innocent mistakes, like forgetting to renew a license, can have significant consequences, such as losing your lawsuit for payment of services that are unlicensed, which makes it imperative to have business license management procedures […]
Author: Dan Brecher
Failing to Comply With NJ Rent Control Exemption May Prove Costly
What Developers Need to Know About New Jersey’s Rent Control Exemption Law to Ensure Entitlement to Exemption for Newly Constructed Multi-family Housing. A property owner in Jersey City is facing a $400 million federal class action lawsuit alleging that the landlord did not follow the procedural steps required to be eligible for exemption from local […]
Author: Patrick T. Conlon
Crypto Securities Law: When Tokens Become Investment Contracts
The application of traditional federal securities laws to crypto assets continues to evolve. In some cases, the Securities and Exchange Commission (SEC) considers tokens and other digital assets to be securities. This makes them subject to federal securities law, including the Securities Act of 1933 and the Securities Exchange Act of 1934. This classification has […]
Author: Bryce S. Robins
The Due Diligence Process for NY Condominiums and Cooperatives
While the New York City real estate market can be extremely competitive, moving too quickly often backfires. Before purchasing a condominium or cooperative in New York City, it is important to do you homework. Purchasing property in NYC can involve a dizzying number of legal issues. These include condo and co-op rules, rent restrictions, and […]
Author: Jesse M. Dimitro
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.