Many businesses use independent contractors as a way to sidestep, expensive and red tape. But if the IRS concludes that those workers are really employees, you could be liable for back taxes, penalties and interest charges. You also risk facing an audit by the U.S. Department of Labor and getting sued for back wages and penalties if you misclassify employees as contractors.
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, fin...(register to read more)
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Don't let supervisor punish employees who cooperate in investigation
- EPLI coverage: Shopping for lawsuit security
- Feel free to reassign employees if it's justified—you won't be liable for retaliation
- HR's New Year's resolutions: The top 10 to-do's in 2010