Thursday, June 20, 2013

Should your independent contractors really be employees?

Internal Revenue Service (IRS)
Internal Revenue Service (IRS) (Photo credit: cliff1066™)
The IRS, U.S. Department of Labor and state governments have a big stake in correctly classifying workers. Improper treatment of workers as independent contractors costs the government tax revenue, in the form of lost withholding, unemployment, workers’ compensation, and Social Security and Medicare taxes. This opportunity for reclaiming revenue has led to renewed compliance efforts. How big is the problem? Even with the interest in proper classification, it is not clear how many workers are misclassified. According to U.S. Bureau of Labor Statistics, contractors made up 7.4% of all workers in 2005 equating to 10.3 million workers. With the recent economic stress on small businesses, chances are that the use of contractors has increased significantly since 2005.