Common error may soon have much stiffer penalty
November 13, 2008 by Carol KatarskyPosted in: 1099s, Best practices, Hiring & training staff, In this week's e-newsletter, Internal controls, IRS regs, Latest news & views, Tax compliance
A new bill would clamp down on employee classification errors — and hike the fines as high as $10k.
The “Employee Misclassification Prevention Act” (S. 364B) would amend the FLSA to clarify that misclassifying employees as independent contractors is a prohibited act. The bill would also call for civil penalties of up to $10,000 as well as liquidated damages for the employees who were affected.
If the bill passes, your company will be required to formally notify workers of their status as ICs, and keep records pertaining to the classification and the workers’ employment.
A related bill, H.R. 6111, has been introduced in the House.
Note: The Senate version is co-sponsored by President-elect Obama, so not only is it likely to pass a Democratic-controlled Congress, there’s also no doubt he’ll sign it into law.
Tags: A/P, Employment tax, Independent contractors, New legislation, Payroll, Penalites
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November 20th, 2008 at 12:13 pm
Since this whole thing is obviously as clear as mud … let’s punish the employers, most of who try to do things right, rather than providing better classification guidance. Great.
November 20th, 2008 at 12:19 pm
Kim in KS: I don’t disagree with you at all. But part of the problem is that the handful of companies that deliberately misclassified workers as ICs just to save a few bucks focused IRS on enforcement, Which also means the feds are spending less time on helping the majority of companies that ARE trying to do the right thing.
On the bright side, IRS is taking baby steps to draw clearer lines around who is, or isn’t an IC. But it’s taking awhile.