Replies

It goes beyond that... There are 20 common law factors that are supposed to be used to weigh whether or not a worker is a contractor or employee - case law shows that if the worker meets just 4-5 of the factors, they are found to not be an employee. Of course, the IRS takes the stance that if you meet ANY of the 20, it’s an employee. Of course, States consider otherwise (and rightly so).

Try to justify to a State why a contractor is NOT given a 1099, but a W-2. And try to explain to the IRS why an “employee” is given a 1099 and not a W-2. And try not to get both sides upset at you.

If you’re tagged/audited by the IRS and you have ANY contractors on staff, you best not meet ANY of the 20 criteria or they will consider it willful misrepresentation of classification and immediately hit you for at least twice the taxes that should have been due (income and FICA and SS). And you have to fight to not only show it was NOT willful, but that the worker was in fact a contractor.

I know, it happened to me 3 times in 7 years. Even pointing out to the “revenue officer” (yes, that’s their title) the LAW and the IRS’ own guidelines that it is to be a WEIGHTED evaluation of the 20 factors, I was still found to be committing willful misrepresentation and hit with literally hundreds of thousands of dollars of fines and levies. Which are applied immediately - you know what an IRS levy does to your credit lines?

In each case, after 6 months and tens of thousands of dollars in legal fees to fight them I got the IRS to “forgive” the infraction and accept my classification. Yes, “forgive” me for doing nothing wrong to start. In each time, they even tried to attach my personal assets even though that is clearly illegal (corporate veil).

Just another example of the IRS taking a guilty-until-proven-innocent attitude. And even when PROVEN innocent in a judicial pre-trial review or court they still consider you’re doing something wrong, they just haven’t found it yet... I’m convinced that beating them in the first audit was the reason I got two more in the space of 3 years.

The IRS is one of the largest drags on the economy; I know that much of the offshoring of companies and assets is strictly to avoid their own contradictory and unilateral means of dealing with the tax payer. If the asset is outside their reach, there’s a lot less to worry about...