The government thinks that there too many people filing 1099s as Independent Contractors. Currently, they are focused on identifying instances of worker misclassification so they can claim employment taxes on that person. Vigilant employers are stepping up accordingly, so that there is adequate proof that certain members of their staff are indeed Independent Contractors, not employees. To be even safer from this official scrutiny, some are converting them to employees through recruiting firms like ours.
If you are a client of Staffing Perfection, we would be happy to discuss the benefits of converting your 1099-ICs to employees. Essentially, you put them on contract assignments and outsource their employment to us as the W-2 Employer of Record. That way, you can still escape the administrative and financial burdens of employing the workers, without the risk involved with making them Independent Contractors.
It is not only the Federal and local governments that are cracking down on worker misclassification. The U.S. Department of Labor has stepped up its own enforcement efforts. As part of the Misclassifcation Initiative, the DOL has vowed to work with the IRS and share information. Some companies are already paying the price, and more DOL investigations are reportedly underway.
At a very basic level, these agencies are looking at how much control the employer has over the workers as a first level analysis. Then, they also take a look at how financially dependent the worker is on that one employer. If a red flag goes up, they dig deeper into things like benefits and how business expenses are handled. Employers could essentially be on the hook for a lot of money if it is determined that employees have been misclassified.
You should also be aware the workers themselves may make a claim of misclassification using Form 8919. It is best to get ahead of the crackdown by doing a proper analysis of your workforce. If you think one or more individuals may have been misclassified, there is a Voluntary Classification Settlement Program (VSCP) that sets the record straight going forward and provides partial relief on what is owed. Depending on your situation, it may make sense to convert Independent Contractors to employees through a recruiting agency, just to be safe. Don’t worry. We are here to help!
Disclaimer: Staffing Perfection, Inc. is not a legal firm, and thus, the above should not be construed as legal advice. We encourage you to speak to your lawyer before making any final worker classification decisions.