IRS Cracking Down on 'Independent Contractor' Label

August 1, 2013

The IRS says it’s cracking down on the use of the label "independent contractors" so companies can't skirt employment taxes. In a new report, the IRS says that many employers are misidentifying millions of workers as independent contractors instead of employees. 

"This problem adversely affects employees because the employer's share of taxes is not paid, and the employee's share is not withheld," says J. Russell George, Treasury Inspector General for Tax Administration. "If left unchecked, the problem will continue to deprive the federal government — and the American people — of millions of dollars in lost revenue every year." The IRS reportedly loses about $1.2 million per year because of workers who are improperly classified as contractors. 

The IRS can offer a ruling on a person’s proper employment status. IRS Form SS-8 can be filled out by a worker or company to help determine status and proper tax withholding. 

Source: “IRS Inspector Urges Crackdown On Mislabeling 'Independent Contractors',” Forbes (July 30, 2013)

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