Government may pursue independent contractors and employers

Posted on: February 18, 2010

In Thursday’s (2/18) New York Times, Steven Greenhouse reports on an issue that could affect organizations hiring independent contractors. “Federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors. President Obama’s 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years. More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers. … Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes for those workers. Companies do not withhold income taxes from contractors’ paychecks, and several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income. … Employers deny misclassifying workers deliberately. The businesses say the lines are unclear between employee and independent contractor. … The Obama administration plans to expand investigations by hiring 100 more enforcement personnel. The I.R.S. has begun auditing 6,000 companies to see whether they are in compliance with the law.”

Posted February 18, 2010