It’s not uncommon for small businesses to be a little fuzzy about whom they classify as employees vs. independent contractors — but this practice just got a lot more risky.
The Internal Revenue Service launched a program last month that will randomly examine 6,000 companies over the next three years for employee misclassifications. The federal government estimates it will raise $7 billion over the next 10 through tighter enforcement.
Independent contractors are convenient because employers don’t have to pay much for them on top of their salary (no payroll taxes or unemployment fees), but the risk of getting audited probably isn’t worth it.
Make sure your employees are classified correctly. Check out the IRS’s definitions of an independent contractor here.
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