Costs of Misclassifying Employees as Independent Contractors Continue to Rise as the IRS Cracks Down

ECRM HR Counselor's Corner

by Renee Mielnicki, Esq.

An area of growing concern for employers is the misclassification of an employee as an independent contractor.  According to Internal Revenue Service (IRS) estimates, millions of workers are currently misclassified as independent contractors.  Misclassification allows employers to escape paying social security, medicare, unemployment and payroll taxes.  The IRS estimates that some employers save approximately $43,007 per year in taxes by misclassifying employees. Since the employer’s gain is the government’s loss, the IRS recently partnered with the Department of Labor (DOL) to share employment misclassification information. They set a goal of investigating 6,000 employers to increase tax revenue.  With a struggling economy and the government constantly on the brink of default, it’s no wonder this issue is a focus.

Another reason for targeting misclassification may be that employers with at least 50 employees will soon have to offer affordable health care under the Affordable Health Care Act…

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