An old-reliable safeguard when hiring independent contractors can lead to big trouble with the Tax Man.
There are countless factors to weigh when deciding whether a worker is an employee or independent contractor (IC), and many companies use an IC contract to back up their classification.
The once-reliable move can actually lead to an IRS audit – here’s why.
The trend: Unemployed workers are so desperate that they’ll sign anything, including an IC contract, to land a job, even without understanding the details.
IRS is now taking that into account and looking specifically at companies’ IC contracts to gauge their authenticity.
That’s the word from Sarah Plowman, Senior Policy Analyst for IRS’ Employment Tax Division.
A stock IC contract may be easy for both parties to fill out, but you’ll need a customized contract for each IC to keep your company safe. Completion dates and project details should also be clearly laid out.
(From a presentation, “Independent Contractor Issues,” at the 30th Annual APA Congress in Orlando.)