IRS Launches New “Misclassification Initiative”

How you classify your workers – as “independent contractors” or “employees” – matters a great deal to the IRS. The IRS is aware that employers prefer to treat workers as independent contractors to avoid paying fringe benefits and payroll taxes. The IRS estimates that 80% of workers who are classified as independent contractors are actually employees. About 100 new auditors have been hired with the specific task of investigating misclassifications, and the government is estimating that the crackdown will generate at least $7 billion in revenue over the next ten years. For guidance in classifying your workers, contact our office.