Many employers incorrectly classify an employee as an independent contractor. Some employers do it intentionally (to avoid workers’ compensation and payroll taxes); but most are unaware of what the difference in classification actually is.
If you use Independent Contractors (also known as 1099’s), you better audit all of them at once. The IRS is about to launch comprehensive audits of 6,000 businesses. The focus is – you guessed it – properly classifying employees.
Please take a moment to review the criteria the IRS uses to determine whether a person should be classified as an employee or Independent Contractor. It’s about control. I’ve had clients insist a person is classified as a 1099 simply because that person requested classification that way! (That’s wrong as well, by the way).
Get a qualified consultant or employment attorney to audit your practices and procedures as soon as possible.
Courtesy Baker Hostetler