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
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
Smart Contract Legal Issues: Drafting Agreements for Blockchain
Smart contracts feature a unique blend of legal agreement and technical code. This innovation has the potential to reshape how business is conducted. At the same time, smart contract legal issues around enforceability, jurisdiction, identity, and compliance are common. The legal framework for these self-executing agreements is still evolving. What Are Smart Contracts? Smart contracts, […]
Author: Bryce S. Robins
Are Stay Interviews the Key to Retaining Top Talent?
Retaining top talent continues to be one of the greatest challenges facing employers today. Even in an employer’s market, the loss of a key employee can disrupt operations and result in significant costs. While compensation plays a role, long-term retention often depends on workplace culture, communication, and employee engagement. One increasingly popular strategy for improving […]
Author: Angela A. Turiano
Why Secured Transactions Are Important
Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]
Author: Dan Brecher
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.