“Independent Contractor” Classification Is Under IRS Scrutiny

April 13, 2010 - PRLog -- When employers report wages for independent contractors on IRS form 1099, rather than a W-2, they aren't required to pay unemployment insurance, worker's compensation insurance or payroll taxes for them. But the rules governing which workers are genuinely "independent" are strict – and scorned. So what's the correct definition of an independent contractor? It depends on who you ask.  For some, state examiners seem most interested in whether so-called independent contractors are able to control their own schedules and the manner in which they perform their work. One of the important issues is where the work is completed and who owns the equipment used.

If your business uses independent contractors, get ready for new scrutiny. You can either convert them to employees or make sure they were doing the proper things to maintain their contractor status." That includes using their own equipment, working out of their own home or office and taking on jobs for other clients. Using contractors offers a lot of benefits, but you have to make sure you're doing it right

If you're not sure whether your independent contractors are properly classified, review the appropriate guidelines from your state and the IRS, or -- better still -- consult a local tax attorney or accountant to help you sort it out. You don't want the government to come calling and decide you owe a lot of back taxes and fees for classifying contractors incorrectly.

Are you high risk or audit proof???

If you’d like more information about this topic or to schedule a FREE consultation with a audit prevention specialist visit http://www.taxpayerallianceservices.com

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