Worker Misclassification

The misclassification of employees as independent contractors presents one of the most serious problems facing affected workers and employers. Businesses may classify workers as independent contractors to avoid expenses such as social benefits, overtime, holiday & sick pay and unemployment compensation.

In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence will be considered.

Determining Worker Classification

In the main, there are three areas that the IRS will look at;

Behavioural control – instructions given to the worker / training provided.
Financial control – including expenses, investments, services rendered, how the worker is paid.
Type of relationship – including benefits such as insurances and pension plan, together with the permanency of the position.

If a company is found to have misclassified a worker as an independent contractor, the consequences will depend on whether the IRS determine that the misclassification was intentional or unintentional.

If unintentional, the employer faces financial penalties relating to failure to withhold taxes and interest, as well as administrative fees. If the IRS suspects fraud or intentional misconduct, it can impose additional fines and penalties.

At IF Workforce Solutions, our HR professionals help you to determine the best way forward with these complicated issues, avoiding unnecessary fines. We will review your requirements and offer the best solution for workforce placement, be it as freelance contractors, or as employees. By instating IF Workforce Solutions as your Employer of Record, you eliminate the risk of worker misclassification.

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To learn more about IF Workforce Solutions and how our team of international tax experts can help you get in touch. Our service is fast, confidential and could open your eyes to a fresh approach to contractor taxation

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