A new initiative involving 10 states, the IRS and the U.S. Department of Labor takes aim at worker classification.
Classifying workers as independent contractors is about to get a lot tougher in those states that are part of a cooperative effort with IRS and the DOL to nab employers and employees who aren’t following IC rules.
The participating states have agreed to work with the feds in various ways — some more extensive than others. For instance, some will step up enforcement through the state attorney general’s office, and some will work through the state labor department. The participating states are:
The agreement is part of the so-called “misclassification initiative” started last year by the DOL and announced in its budget proposals. The department has contended that too many businesses are misclassifying workers as ICs to avoid paying employment taxes and benefits.
And why are the IRS and states involved, too? You probably know the answer: revenue. The IRS and the states claim lots of workers who are falsely classified as ICs aren’t reporting and aren’t paying full taxes on their income.
The message: If you’re an employer, especially in one of the 11 states, be careful about classifying workers as ICs.