IRS Cracking Down on "Contractors" that should be employees.

The U.S. Department of Labor and the Internal Revenue Service are cracking down on companies that misclassify employees as independent contractors to avoid paying employment taxes.

The feds and states that have signed on, nine of them so far, will exchange information about companies breaking the rules. That means you could face sanctions from both state and federal agencies along with back taxes, penalties, interest, and other consequences from the IRS.

The states involved so far: ConnecticutHawaii,MarylandMassachusettsMinnesotaMissouriMontana,Utah, and WashingtonNew York is expected to join the effort soon.



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Comment by Steve Drevik on September 23, 2011 at 1:53pm

I also found this interesting when discussing ScooterGuy and the employee vs. independent contractor IRS issue:


My reading would that ScooterGuy would be on *very* thin ice with the IRS trying to characterize the scooter drivers as independent contractors.   Even cab drivers that lease their vehicles and have the right to turn down fares and quit the day when they want to are often considered by the IRS as employees.


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