Why does proper independent contractor vs. employee classification matter? Independent contractors vs. employee classification… is it really that big of a deal? Definitely. Why? Making an incorrect classification can expose you to labor lawsuits, penalties, and back payroll taxes. The U.S. Department of Labor wants to ensure fair labor practices, since misclassifying an employee as
Many businesses use independent contractors to help keep their costs down. If you’re among them, make sure that you properly classified these workers as independent contractors for federal tax purposes. If the IRS reclassifies them as employees, it can be a costly error. It can be complex to determine whether a worker is an independent
The new employee classification rule simplifies the process in some ways, but it generates new questions that business owners should be prepared to tackle.
Many employers prefer to classify workers as independent contractors to lower costs, even if it means having less control over a worker’s day-to-day activities. But the government is on the lookout for businesses that classify workers as independent contractors simply to reduce taxes or avoid their employee benefit obligations.