We don’t like to admit it, but even the most-organized department makes the occasional mistake. Expect it to feel a lot worse if this common error slips past your controls. A pending bill would require you to collect more info on any independent contractors (ICs) your company hires.

You won’t just be getting more info — you’ll have to send out more, too. With each 1099, you’ll be required to give ICs contact info for the Dept. of Labor. So, it’s that much easier for them to report your company for any mistakes — real or imagined — that a contractor thinks you might’ve made. 

(Let’s face it, even if you do everything by the book, an IRS audit is probably the last thing you need.)

Has your company ever mistakenly classified an employee as an IC (maybe you suspect that it did but it was never caught by the feds)? Penalties for that and related mistakes would also increase under this legislation. Under the bill, (H.R. 6111) your company could pay up to $10,000 per violation. 

There are several related bills pending in both the House and Senate, so it’s too early to say exactly which version (or combinations thereof) might end up as law. 

But with Congress and IRS both looking at increased IC enforcement as a good way to close the so-called Tax Gap, you can be sure some version of these bills will pass. And most likely, it’ll be sooner than you expect.

Tags: 1099, Audits, DOL, Enforcement, Independent contractors, Payroll