If you’re hiring home inspectors for your firm, it’s important to fully understand the distinction between an employee and an independent contractor to avoid complications from the Internal Revenue Service. With everyone looking to cut costs and the IRS conducting payroll audits on worker misclassification, let’s take a look at the difference between full-time staff and contractors.
According to the IRS,” in general, someone who performs services for you is your employee if you can control what will be done and how it will be done.”
Nearly 30% of all firms misclassified contractors. This amount equals to billions of dollars in unpaid taxes, and the IRS is working hard to intervene.
An additional $900 million per year would go towards the IRS, if the tax agency were to modify its “safe harbor” rules, making it difficult for employers to classify workers as independent contractors.
Misclassifying your workers may result in… Owing back payroll taxes, interest and stiff penalties.
- The government has collected $9.5 million in back wages for more than 11,400 misclassified workers since September 2011.
- It’s estimated that $8.71 billion of tax revenue will be collected over the next 10 years by the US Treasury by forcing employers to rightfully classify workers.
- 1000 small businesses have signed up for an extended amnesty program that way some penalties to encourage employers to voluntary reclassify contractors as employees.
NOTE: Experts advise if you find that you need to reclassify your contractors or bring them onto payroll be sure to consult a tax expert or legal counsel before you take action!
To give you some greater clarity on this issue, we asked Steve Brewer, CPA, and Savvy Inspector Partner Vendor to help us understand more about the classification process.