We’ve been advising HR That Works Members to get their independent contractor act together. This is an exploding risk exposure driven in large part by the need of federal and state agencies to make sure that they collect all their taxes. The IRS estimates that the 1099 misclassification problem, due primarily to poor controls, has led to more than $8 billion in unpaid taxes.
As we advise members, “If it walks like a duck and talks like a duck it’s a duck, no matter what you call it�. If you have any independent contractors and you’re an HR That Works Member, look at the new Independent Contractor Training Module, which includes a video, IC agreement, analysis worksheet, and a guide to many state and federal resources in this area.
Don’t take this lightly! In November of 2009, the IRS launched an audit of 6,000 companies, essentially to prove the value of hiring more auditors to collect more money. I can tell you what their conclusion will be: That they should hire more auditors because there will be a greater return on investment given the amount of unpaid taxes out there. This exposure is significant, not just from a taxation perspective, but as a liability and risk management issue. Bottom line: It’s far better to pay the additional taxes, workers comp premiums, and medical expenses than to run afoul of the misclassification analysis.
For more information, click here, and visit the Independent Contractor Training Module on HR That Works.
