Misclassification Of Employees As Independent Contractors
IRS reclassification as an employee occurs where persons claimed as (or claiming to be) independent contractors are recategorized by the Internal Revenue Service (IRS), or by state tax authorities, as W-2 employees. The reclassification can result in the imposition of fines, penalties, and back-taxes for which the employer is generally liable. These amounts could cost a business large sums of money. The U.S. Government Accountability Office (GAO) (formerly known as the General Accounting Office) reports that the IRS claims to lose millions of dollars in uncollected taxes because of misclassification of independent contractors by taxpayers. According to IRS Commissioner Mark W. Everson in a statement made November 3, 2005, IRS audits of small businesses organized as corporations increased from 7,294 in 2004 to 17,867 in 2005.
Read more about Misclassification Of Employees As Independent Contractors: Who Is Being Classified?, Employee Vs. Independent Contractor, Mitigating IRS Reclassification Risk, Organizations Working Against Misclassification, External Links and Resources
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