Employee or Independent Contractor

Businesses need to be aware of the complex compliance issues relating to the proper classification of employees versus independent contractors because the determination has significant tax implications for both workers and employers. It affects the determination of whether the employer is required to pay Social Security taxes, Medicare taxes, and unemployment taxes and withhold income taxes, as well as whether the employer is required to provide health insurance. While misclassification has been a long-term concern of the Internal Revenue Service (IRS), the problem is now more important due to the Affordable Care Act's requirement to provide health insurance for employees. The IRS is well aware that businesses now have even more incentive to classify workers as independent contractors and has embarked on an enforcement project targeting the misclassification of employees as independent contractors.