It’s been going on for years: Business owners frequently clash with the IRS over worker classifications. Usually, owners claim that certain workers should be treated as independent contractors, while the IRS maintains that they are actually employees subject to federal employment taxes and other burdensome requirements.
Our advice: Don’t surrender quickly if the IRS challenges your worker classifications. It’s an uphill battle, but you can prevail if you have a legitimate gripe and you stick to your guns. Here’s some ammunition for your battle ahead.
What’s at stake?
When a worker is classified as an “employee,” you must withhold federal income tax and the employee’s half of Social Security and Medicare taxes (FICA) from the paycheck.
Even worse: You must pay the employer’s half of the FICA tax and the federal unemployment tax (FUTA). Finally, you must issue a Form W-2 for the employee’s wages earned and send a copy to the I...(register to read more)