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IC or Employee: The Battle Rages On
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In 1984 the IRS estimated that 3.4 million employees were incorrectly classified as independent contractors. While there have been no comprehensive studies since, that number has likely increased during the past quarter century.
Because each misclassified worker represents uncollected employment taxes, lawmakers are always looking for ways to prevent misclassification. This issue describes one of the latest efforts, as well as some quick rules for determining whether your workers are employees or contractors.
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| Patrick Harbin – Editor
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Payroll Fraud Prevention Act |
A proposed law working its way through Congress may actually harm businesses that correctly classify their workers.
See Independent Contractor or Employee? Put it in Writing! on TAPC.
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Employee Classification |
While determining whether an individual is an employee or independent contractor involves examining the nuances of their job, the IRS has taken steps to make the process easier. The IRS website says the following three questions should help organizations make the determination:
- Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Are the business aspects of the worker's job controlled by the payer?
- Are there written contracts or employee-type benefits?
Proper employee classification should be part of your information reporting policies. Sign up for TAPN's upcoming webinar, Achieve 1099 and 1042-S Regulatory Compliance with Sound Policies and Procedures, for more on how to make sure the right people get the right information returns. The webinar earns 1.5 CEUs.
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Just for Fun! |
Ever since we entered the 21st century, one question has been on everyone's mind – where's our personal jetpacks? One aircraft company believes those days may finally be here. See Why you might soon have a $100,000 jetpack.
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