The IRS is going after firms that classify employees as independent contractors. The tax agency and the Labor Dept. are sharing information and both will shortly be sharing information with state agencies to identify companies that violate the tax law or are suspected of violating the law.
Currently there are volunteer programs for companies that aren’t being audited and can correct errors and pay a small penalty if they agree to treat the workers as employees going forward. Small businesses will be affected/targeted most by the stepped-up IRS scrutiny.
Many are independent contractors themselves or rely on them. Plus, smaller firms often don’t have easy access to CPA’s/lawyers to advise them on how to classify workers.
The initial focus will be on the following industries: Construction, transportation and technology firms.
Those who don’t correct the problem will be subject to penalties, fines and interest. These new employees could be open to refunds on amended returns for their payment of SE taxes. SO now they have a greater incentive to call the DOL.