1. Properly classifying workers remains a major problem | Accounting Today

    Worker misclassification is a perennial issue for the Internal Revenue Service and state taxing authorities due to the perception that many employers are not properly classifying their workers. By avoiding labeling their workers as employees, employers also avoid paying minimum wages, overtime, payroll taxes, worker’s compensation, unemployment, Social Security contributions, health benefits, paid leave, 401(k) benefits and unpaid leave under the Federal Family and Medical Leave Act.

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    1. Accountants may be unfamiliar with the distinction, and if the IRS or Department of Labor comes in and disputes the decision to label them as independent contractors, they can land in trouble.
    2. It's a hot-button issue with the IRS, and the DOL and state workers compensation boards are becoming more involved.
    3. With several employees over several years, this can quickly become a nightmare.
    4. It allows the employer to pay a reduced fine or penalty if they agree to reclassify and start to withhold and pay tax on a prospective basis.
    5. The third step is finding a reasonable basis to treat them as independent contractors.