If you are a consumer of HR newsletters, you are well aware that the government is serious about targeting misclassification of employees as independent contractors. More attention on worker classification means an already risky business is about to get riskier. It behooves any business to pay attention before infractions hurt a business’s reputation or their bottom line.
Why do the IRS and DOL care so much about worker misclassification?
You can bet if they have their collective knickers in a bunch, it probably comes down to one thing: simple economics.
Non-compliance with IRS and DOL regulations governing which workers are classified as W-2 employees versus 1099 contractors means lost tax revenue at the state and federal level. That’s because fewer tax dollars are coming from employers without a corresponding increase in tax revenues from independent contractors.
This, combined with huge federal and state budget deficits, is a recipe for stepped up surveillance and enforcement. Witness The Payroll Fraud Prevention Act, which underscores how much attention this issue is getting in Congress.
Still not convinced this iron is hot? The IRS, DOL, and several state agencies share employer information with specific the goal of tracking down practitioners of worker misclassification. Worse, the government doesn’t care if employers misclassify accidentally. It’s up to you to abide by the law.
If you’re concerned about misclassification and don’t have the internal team to manage increasing demands around it, it might be time to consider engaging a partner that knows the laws and can help keep you compliant. We’re ready to talk about what solutions might make your life easier.