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Using Independent Contractors

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in Employment Law,Human Resources

Many businesses use independent contractors as a way to sidestep payroll taxes, expensive fringe benefits 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.

What’s worse, the newly classified employees could sue your organization to be included retroactively in your benefits plan, 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.

Behavioral control

Facts that show whether the business has a right to direct and contro...(register to read more)

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