Temporary Amnesty for Businesses Misclassifying Workers

The Internal Revenue Service (IRS) is offering a temporary amnesty program to companies that have misclassified workers. The most frequent occurrence of misclassification is when employees are hired as independent contractors, which strips them of employee benefits and evades taxes. According to the Washington Post, this indefinite period of amnesty would permit employers to reclassify employees correctly and pay a minimal amount of back taxes. The program covers only federal taxes; meaning that employers could still be liable for unpaid state taxes. If businesses don’t come forward during the amnesty period and are later caught wrongly classifying employees as independent contractors, they could be liable for three years’ worth of employment taxes, in addition to interest and penalties.

The Internal Revenue Service (IRS) is also joining with the U.S. Department of Labor (DOL) and individual states to crack down on the misclassification of employees. This practice strips state and federal governments of much-needed tax revenue and wrongly withholds deserved pay from workers. A Department of Labor study claimed that up to 30% of employers misclassify workers and another study showed that some companies save up to 30% on payroll by misclassifying employees. Because some small businesses are legitimately confused about how to properly classify workers, this new temporary amnesty program should be an attractive way to set things straight.

In the case of being classified as an independent contractor, a worker may be wrongly denied benefits reserved for company employees, including health insurance coverage, pension plans, wages, and the protection of certain laws designed to protect employees. An employee is considered a worker that has the “right to control” what needs to be done and how it should be done. Conversely, independent contractors are told what task needs to be done and only determine how the task should be completed.

Misclassified employees are often denied both overtime and benefits associated with the position they should be classified as. If you believe that you have been misclassified by your employer, you may be eligible to receive compensation as back pay for wrongly withheld salary. Contact an experienced overtime lawyer through the free evaluation form to find out if you can pursue justice and seek to rectify your situation. The Fair Labor Standards Act (FLSA) prohibits employers from taking adverse action against any employee who files a complaint regarding overtime violations or participates in an investigation initiated by the Department of Labor.