Many businesses use independent contractors as a way to sidestep payroll taxes, expensiveand red tape. But if the IRS concludes that those workers are really employees, you could be liable for back taxes, penalties and interest charges.
What’s worse, the newly classified employees could sue your organization to be included retroactively in your, forcing you to incur a huge, unexpected personnel cost.
The IRS Test
For years, the problem for businesses had been the ambiguity of the 20-factor test the IRS used to classify workers. In the late 1990s, under pressure from Congress, labor and business interests, the IRS simplified the test. It consolidated the 20 factors into 11 tests and organized them into three main groups: behavioral control, financial control and the type of relationship between the parties.
Facts that show whether the business has a right to direct and contro...(register to read more)
- Train your managers: Make no promises about wages or raises
- The rules of company blogging: Avoiding employee misuse and abuse
- Workers trained to clean up Gulf oil spill cry foul
- Don't withhold promised severance when a former employee files suit
- When contracting with temp or payroll services, make sure it's clear who the real employer is