Small Business Employers: Are Your Workers Classified Correctly?

McFARLANE LAW-A Tax Law Firm provides step-by-step guidance to ensure employees are classified correctly and that your employer clients are prepared with the proper documentation should the IRS select them for an audit.

“Get it correct or pay the penalties" seems to be the message when it comes to classifying the workforce as either an independent contractor or a full-time employee. The Department of Labor (DOL) and the Internal Revenue Service (IRS) are both stepping up their enforcement efforts with random audits. They levy significant financial penalties when they find that a worker has been classified incorrectly. In Arizona, the Department of Revenue (ADOR) and the Department of Economic Security (AzDES) have also stepped up their enforcement and audits of employers in classifying their workers.

Perhaps the first step in "getting it correct" is a self-audit of your workforce. The IRS, ADOR, and AzDES uses a 20-point list employers should consider when classifying workers. The DOL also has its independent contractor requirements. Also of note is that the DOL recently withdrew its Administrator's Interpretation on misclassification, which may impact how the agency enforces the law. Based on all of this, there is no question that employers need a better understanding of how to apply these factors to help them determine if their employees are truly independent contractors or are actually employees.

Contact us at McFARLANE LAW to discuss your worker classification issues.

McFARLANE LAW – A Tax Law Firm
14500 N. Northsight Blvd., Ste. 217
Scottsdale, AZ 85260
T.480.991.0032 / [email protected] / www.taxlawaz.com