So it begins: Can your business survive an IC audit?
Remember how the DOL earmarked a ton of money to help states root out businesses that misclassify their employees to avoid paying fringe benefits and payroll taxes?
Well, at least one of these states has made good use of those funds – and you can bet the rest will soon follow.
New York’s Joint Enforcement Task Force on Employee Misclassification discovered 133,000 workers who were misclassified as independent contractors or “off-the-books” workers in 2014.
Regulators conducted over 12,000 audits uncovering $316 million in unreported wages and over $40 million in unpaid unemployment insurance contributions.
New York is not alone in its efforts.
Eighteen other states have partnered with the DOL in its misclassification initiative.
What does all this mean?
For one thing, businesses can no longer afford to casually issue 1099s and hope an investigator does not come knocking.
Here are some tips to avoid misclassifying workers:
• Employers should audit their labor pool. It’s important to remember that independent contractors will generally be free from supervision, direction and control.
• Other indications of an
employee-employer relationship include setting the rate of pay and hours of work, requiring attendance at meetings and evaluating job performance.
• If you want to make sure your company is on the same page with the IRS, ask the agency to determine whether your worker is an employee or independent contractor.
• Excuses like, “He works only a few days a week,” “I have him use his own tools” or “He’s been doing this work so long he doesn’t need my supervision,” won’t fly with investigators.
