CHICAGO — A front-page story in the February 18 issue of the New York Times reports that federal and state tax authorities throughout the
Labeling a worker as an independent contractor can save money for the employer because the company is not responsible for worker’s compensation, unemployment insurance, social security, and other expenses.
In addition, these companies may be able to charge less for their services than competitors following the rules.
The government typically views this as an unfair business practice; more importantly, it costs federal and state governments significant tax dollars.
The federal government estimates $7 billion can be collected from employers that misclassify employees as independent contractors.
States will also benefit. The
Historically, the Internal Revenue Service (IRS) has taken the lead on this issue with states following close behind. This time, however, many states are initiating their own investigations.
One case sited in
BSCs have "outsourced" work and employed independent contractors for decades, and it can be done correctly, without tax consequences.
In general, an individual is an independent contractor if the BSC is only concerned about the results of the work [performed] and not the means and methods of accomplishing the result.*
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