Are you an employer or a contractor with people who perform labor and services for you?
Are those service providers your employees or independent contractors?
The distinction makes a big difference for both insurance and tax reasons.
A big battlefield is with respect to workers compensation insurance premiums and employee payroll taxes. Having employees triggers those obligations, but independent contractors do not. There are also health insurance requirements that apply to employees but not independent contractors. These are all big expenses that tempt employers to classify their people as independent contractors. That can be a risky bet that may result in taxes, fines, and penalties if the IRS or state authorities determine that the characterization is incorrect.
Take steps even before you are given notice that your employment records will be audited. There are steps you can and should take to protect the classifications of your people as independent contractors or employees for certain purposes. Federal law provides for a “safe harbor” that can protect you from taxes, fines, penalties, and interest. This may be available so seek the advice of a professional, such as an accountant or attorney, about how to classify your people, and then rely on that advice. You should have that advice appropriately documented. There are other requirements, and also some other routes to get to the safe harbor.
Get advice as soon as you can so that you can establish entitlement to safe harbor before you receive a notice of audit.
If you have questions or concerns about these issues we would be pleased to work with you.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.
Gerald Jacobowitz was previous of counsel with the firm and practiced Environmental/Land Use, Administrative Law, Banking & Finance Law, Business and Commercial Law, Estate Planning, Municipal Law, Probate and Estate Administration
Real Estate Law/Construction Law.
We can be reached by phone at 845-764-9656.