Congress has introduced two bills intended to discourage businesses from misclassifying employees as independent contractors and end the issuance of Form 1099s to workers who are not legitimate independent contractors. Both bills – one a labor bill and the other a tax bill – have the laudable objective of curtailing misclassification of employees as independent contractors. But the two bills, although related, contain different tests for determining who is an independent contractor or employee. The Obama Administration has firmly endorsed both bills. While some Administration-supported legislative initiatives have little chance of passage in the lame-duck session of Congress or in 2011, these bills have a far better chance of passage because they are both revenue raisers. Between the two bills, the labor bill may be passed earlier, inasmuch as hearings on the bill have already been held.It can hardly be disputed that businesses that … [Read more...] about Congressional Approach to Misclassification of Employees as Independent Contractors Would Confuse Rather than Clarify the Law
Independent contractor tax form
The IRS recently modified and expanded the Voluntary Classification Settlement Program (VCSP), which allows employers to achieve legal certainty by reclassifying independent contractors as employees for future tax periods. Until June 30, 2013, the IRS is waiving the program eligibility requirement that an employer must have filed 1099 forms for the past three years with respect to workers they are seeking to reclassify. An employer who has misclassified workers as independent contractors should seriously consider making a correction under this expanded program.The standard VCSP is available to employers who have consistently treated the workers in the past as nonemployees and who have generally filed all Forms 1099 for those workers for the past three years. To participate in the program, employers must complete an application on Form 8952 and pay 10 percent of the federal employment tax liability that would have been due on the compensation paid to the workers for the most recent … [Read more...] about Internal Revenue Service (IRS) Expands Amnesty for Independent Contractor Reclassifications
Many telehealth companies, particularly those with multi-state footprints, look to an independent contractor model when developing their network of physician providers. An independent contractor model (using 1099 contractors) can offer lower overhead costs because the telehealth provider need not shoulder the same requirements of a W-2 employer model. It also provides scalability when the provider wants to move into new states with initially lower patient encounter volumes. We already know that physician contracts must comply with fraud and abuse laws, as reminded in the June 2015 OIG Fraud Alert on Physician Compensation Arrangements. But another question arises: could these independent contractors actually be considered employees?The answer is not as simple as it may seem. Case in point: Teladoc’s S-1 filing issued in connection with its upcoming IPO. The filing describes how the Texas based company uses an independent contractor model with its healthcare providers in a … [Read more...] about Telemedicine Providers: Are My Doctors Employees or Independent Contractors?
Media outlets throughout the country have recently reported that it appears there was little to no oversight to ensure contractors, which were working on projects receiving federal stimulus money, were not misclassifying their employees as independent contractors. Contractors are motivated to misclassify their employees as independent contractors due to tax savings. The contractors misclassify their employees as independent contractors and then do not withhold taxes on their employees’ compensation or make the required employers’ contributions. Employees, who are misclassified, receive a 1099 Form. A misclassified employee is then required to pay his or her entire tax obligation at one time, as there was no withholding on his or her wages and no employer contributions.Media coverage of apparent misclassification of employees as independent contractors related to federal stimulus projects will no doubt encourage both state and federal enforcement … [Read more...] about Misclassification of Employees As Independent Contractors In the News
Staffing flexibility and efficiency. Reduced liability for federal and state employment laws. Cost savings. There are many reasons why companies use independent contractors. But the bottom line is that these benefits, particularly in today’s economy, can make the difference between remaining competitive in the market place and falling behind. As a result, many employers push the envelope, classifying individuals as independent contractors when they are truly regular employees. Government agencies like the U.S. Department of Labor (the “DOL”) and the plaintiffs’ bar have taken notice and are challenging employers who break the rules. A recent case in the Northern District of Illinois, Bulaj v. Wilmette Real Estate & Mgmt. Co., N.D. Ill. Oct. 21, 2010, highlights some of the mistakes employers make and the risks associated with misclassifying employees as independent contractors. Bulaj worked for Wilmette, a … [Read more...] about Misclassified Maintenance Worker Figures to Clean Up: Judge Holds He Was Not an Independent Contractor