An independent contractor is a worker who individually contracts with an employer to provide specialized or requested services on a project or as-needed basis. The economic and tax advantages associated with the independent contractor relationship are rather significant for most, if not all, employers. However, employers and workers may be subject to stiff criminal civil penalties and fines if the IRS determines that an employment relationship has been misclassified. In most cases, employers may use the "reasonable basis" and common-law tests to classify workers.
Were 'Independent Contractors' Actually Employees?
Time Auto terminated its independent contractor agreements with two truck drivers on the basis of their involvement with a union. However, an administrative law judge found that the two drivers were actually employees of Time Auto and, in terminating them because of their union activities, the company was in violation of the National Labor Relations Act. The company appealed to a federal appeals court, claiming the drivers weren?t employees. Who was right?
How to Avoid Misclassifying Independent Contractors
If a worker is an employee, rather than an independent contractor, the employer is required, among other things to withhold and remit the employee’s tax to the federal government.
NY Finds Thousands of Misclassified Workers
The New York Department of Labor says that a task force found more than 2,000 workers misclassified as independent contractors during a 4-month audit.
IRS Says FedEx Could Owe $319M for Misclassifying Drivers
FedEx Corp. has disclosed that the Internal Revenue Service has tentatively concluded that the company misclassified FedEx Ground delivery drivers as independent contractors in 2002 and that the company could owe $319 million in taxes and penalties.
