More Audits in Store for Employers of Contractors
The February 18, 2010 issue of New York Times had the following article on it’s front page "U.S. Cracks Down on ‘Contractors’ as a Tax Dodge". Hiring 1099 employees has always carried the responsibility of proper classification. However, the current administration’s focus and enhanced enforcement efforts increase the odds of paying dearly for an honest mistake.
Some simple steps can be taken to minimize the potential of a lengthy audit and crippling penalty assessments. The first is to familiarize yourself with the IRS’ Twenty Factor Test. Once you have a handle on the criteria be sure to document all relevant aspects each specific job you have assigned to 1099 contractors. In addition, be sure that any contracts, job descriptions, or other documentation clearly reflects the 1099 nature of the job and/or relationship. Of course these efforts will not prevent an audit, however, they should help expedite the process and reduce the potential of adverse results.
If you have ongoing questions or need additional support on HR related topics you may be interested in QTS’ HR Consulting and HR Outsourcing services. More information can be found on our website or by contacting Jim Ritter. Contact: Jim Ritter (jim.ritter@qtspayroll.com)
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