Do you have misclassified employees?
Tax Tip of the Week
October 19, 2015
Do you have misclassified employees?
Misclassified employees. That's what the IRS calls independent contractors who may actually be employees. Do you know the difference between the two classifications? As Affordable Care Act provisions continue to take effect, getting the answer right becomes essential.
The problem is that getting the answer right isn't always easy. The IRS provides twenty factors and three questions to use as an analytical tool in making the decision. In addition, in July of this year, the U.S. Department of Labor issued guidance in the form of an interpretation based on "economic reality factors." But the final determination depends on the facts and circumstances specific to your business.
Where should you start? Under IRS rules, control is one useful way of resolving the issue. Evaluate your right to control both the end result expected of the person performing the service for your business, and the means of achieving that result. More control — such as providing an office, materials, or equipment — can indicate employee status.
If your workers have been misclassified, you'll need to begin treating them as employees. When you voluntarily change the classification of your workers, you may also be able to participate in the Voluntary Classification Settlement Program. This IRS program provides partial relief from employment taxes that would have been due in prior years, as well as the related penalties.
Please call if you have questions about how to classify your workers.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
© MC 2015
October 19, 2015
Do you have misclassified employees?
Misclassified employees. That's what the IRS calls independent contractors who may actually be employees. Do you know the difference between the two classifications? As Affordable Care Act provisions continue to take effect, getting the answer right becomes essential.
The problem is that getting the answer right isn't always easy. The IRS provides twenty factors and three questions to use as an analytical tool in making the decision. In addition, in July of this year, the U.S. Department of Labor issued guidance in the form of an interpretation based on "economic reality factors." But the final determination depends on the facts and circumstances specific to your business.
Where should you start? Under IRS rules, control is one useful way of resolving the issue. Evaluate your right to control both the end result expected of the person performing the service for your business, and the means of achieving that result. More control — such as providing an office, materials, or equipment — can indicate employee status.
If your workers have been misclassified, you'll need to begin treating them as employees. When you voluntarily change the classification of your workers, you may also be able to participate in the Voluntary Classification Settlement Program. This IRS program provides partial relief from employment taxes that would have been due in prior years, as well as the related penalties.
Please call if you have questions about how to classify your workers.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
