Independent Contractor Crackdown

The IRS appears to be using computers to crack down on companies that pay independent contractors, instead of treating them like the employees they may actually be. Apparently they are using a system to flag companies that have more than five workers getting 1099s, are paid more than $25,000, and who did not report any other income. If your company fits that bill, we suggest you do your own audit. Make sure you aren’t paying people under the wrong classifications so you can avoid the audit, interest and penalties.

To give you one harsh example, Fed Ex just had to pay $319 million dollars in back taxes and penalties for just one year, and then a civil action by their workers brightened their day even more. Yes, they are a big example of what can happen, but hopefully it opens your eyes to the possibilities.