Independent Contractor or Employee? How to Avoid Misclassifying Your Workers
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3-hour e-learning course = 3 PDCs.
Misclassifying workers is one of the costliest mistakes in all of personnel management.
Even as the cost of employing workers rises, facing an audit of workers you put on 1099 can mean an expensive payroll tax assessment – one that often ends in bankruptcy. Although the IRS has remained relatively consistent in their evaluation of working relationships, many states are forcing more and more workers to be put on payroll.
What makes an independent contractor? Most of the answer is in that title itself. In order to establish that a worker is not an employee, you must show independence in the working relationship.You must show that the worker is NOT economically dependent on you.
That is, what factors (pay, tools and equipment, work hours, manner and means of performing services, etc,) does the worker have some or all control over? Then you need to consider the contract under which the worker and the business are bound by. Is there a risk of loss to the worker? Which party is responsible for which expenses? Does the worker have obvious signs of being in business for him or herself? The more an independent contractor agreement looks like an employment agreement, the more likely you are misclassifying those workers.
The DOL in January 20234 issued there Final Rule on the matter of what makes an independent contractor. They dismissed the two main methods of determinations: The IRS’ common law 3 factor test; and many states’ ABC test. Instead, they are finalizing their test that puts economic reliance and outword signs of being in business for oneself (main factors) WITH other tests that can either support independence or emplo9yment.
We will discuss the Final Rule in detail, so that you can evaluate you independent contractors for possible misclassification. You will also be able to effectively argue the topic with auditors, reviewers or courts.
So Join Mark in this important webinar for all hiring managers, as well as payroll and a/p personnel. With a few well-trained individuals in your company, you will gain peace of mind in your worker classification decisions. Take it from an ex-auditor - it is well worth the time and effort to properly conduct business with independent contracts as it is for your employees.
Why you should Attend:
- Know and apply the factors that determine an employment vs independent contractor relationship
- Know how the states can and do differ from the IRS and other federal guidelines
- Correctly categorize all workers as either an independent contractor or employee
- Effectively argue your position if questioned about a worker's status
- Know about and avoid the penalties for misclassification
- Document the reasons for your decision
- Train your hiring, payroll and HR workforce on this matter
Areas Covered in the Session:
- Misclassification Facts - IRS estimates of lost revenue
- Who Cares? - Variety of agencies that audit for this and why
- THE DOL's FINAL RULE
- IRS 3 Part Test - the minimum standard for federal and state purposes
- IRS pub 1779VII. State Determinations - how they are being narrowed year by year
- Exposure - How to determine your vulnerability to audit
- Procedures for ensuring proper classification - how to tighten up your company procedures
- Ancillary Issues
- Electronic Filing and TIN matching
- Backup Withholding
- Current Cases
Who Will Benefit:
- Payroll and HR Managers and Staff
- Hiring Personnel
- Internal and External Audit Personnel
- A/P Managers and Staff
- Personnel Executives
Mr.Schwartz provides consulting services encompassing payroll processing and payroll tax issues. These include payroll tax minimization, payroll tax compliance reviews, independent contractor studies, use of electronic transfers, deductions, benefits, etc. Mark has represented both clients and the State in front of the State Appeals Board. He understands the complexities of local wage laws, unemployment and disability claims, and other wage and benefit issues affecting your employees.
Mark prides himself on his outstanding customer service skills. He listens attentively to his clientele, helping them bridge the gap between the small business world and Government bureaucracy. He eagerly assists with clients needs and feels that educating clients toward faster, accurate and more complete payroll processes provide the most value.
Mark is a participating member of the American Payroll Association. He earned his BA and MBA in Finance at Santa Clara University. He has held Certified Internal Auditor and Certified Investment and Derivatives Auditor Credentials. Mark is currently pursuing a Certified Payroll Fundamentals Credential with the American Payroll Association.