By: Jeffrey A. Risch, SmithAmundsen LLC
When I first received word that the United States Department of Labor and the Internal Revenue Service were both taking monumental efforts to “go after” employers for misclassifying workers as independent contractors, the first thing that entered my head was the famous words of College Football’s most acclaimed broadcaster, Keith Jackson. Jackson’s famous “WHOA… NELLIE!!!” was often used to describe the truly rare and incredible play (for better or worse) that would occur once in any college football game. It was the perfect expression that echoed through my head when I read the press clippings on the latest government crackdown (and while personally immersed in the final weeks of the College Football season).
On November 9, 2009, the Internal Revenue Service announced that it will begin conducting random audits of 6,000 companies starting in February 2010 — with the goal of reducing the number of misclassified independent contractors while expanding revenues. The IRS will randomly select 2,000 taxpayers each year for the next three years. The examinations will be comprehensive in scope. Employers will receive notices describing the process. Records pertaining to employment tax returns and issues will be subject to immediate review. Employers are being forewarned by the IRS to have all of their records available to expedite the examinations. These audits will include line-by-line reviews of employment tax returns and related documents. These audits will initially focus on four targeted areas: payroll taxes, independent contractor status, fringe benefits; and executive compensation.
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