Unless you are a professional bookkeeper, you probably don't like to spend valuable business time keeping records. But keeping good records can actually help you save money.
Consequences of the Misclassification of Employees
If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (relief provisions of IRC section 530 will not apply).
If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required Federal information returns on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977.
If you would like the IRS to determine whether a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Withholding.
For additional information regarding worker classification, refer to:
- Tax Tip, Employees vs. Independent Contractors
- Publication 15-A, Employer's Supplemental Tax Guide (PDF)
Individuals Have Been Investigated and Recommended for Prosecution in the Automotive Industry - Don't let this happen to you.
Scams, schemes and cons are prevalent in all industries and professions. Violations of federal tax and related statutes carry serious consequences.
Understanding Your IRS Notice
We realize that receiving a notice from the IRS can be unnerving, but if you follow these simple steps, the process to resolving the discrepancy should be straight forward.