IRS AND INDEPENDENT CONTRACTORS

Nancy Joerg, Esq of Wessels, Sherman, Joerg, Liszka, Laverty, Seneczko, P.C in St. Charles, IL  has written an article on the topic of independent contractors and the IRS in 2010.  For movers with owner operators this has been an issue for years, whether or not someone is an employee or contractor.  The criteria to determine this has been a cloudy issue for movers but one thing is clear in 2010, the IRS is declaring war on companies that use independent contractors in the form of 6000 audits.  The audits will focus on 5 main categories:  worker classification (independent contractor vs. employee), fringe benfits, reimbursed expenses, officer compensation, and non filers.  The tax year of 2007 and 2008 will be the focus but the scope could broaden if they so choose.  The frightening part is that companies will be selected at random from different industries and different sizes so there really isn’t anything companies can do to avoid the threat.  A report produced by the government in 2009 states that only 3% of determinations submitted to the IRS showed workers to be independent contractors, costing the misclassifying companies over 64 million dollars in taxes and penalties.  The article concludes with 5 steps companies should take if they have independent contractors and the warning to not talk to an IRS agent or auditor without legal counsel.  If you would like to read more about this, check out the article IRS audit program.

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