Many key decisions come up for a business as it is bringing a new worker on. One is whether to classify the worker as an employee or an independent contractor. What classification a worker is given can have many implications for a company, including tax implications. A worker being an employee puts some added tax requirements on a business, as we note in our page on tax issues regarding classification.
Now, a business cannot simply pick whichever classification is likes most for a worker. There are many different factors regarding the relationship between a company and a worker which impact which class the worker should be in. The many factors at play can make figuring out a worker’s classification a complex issue.
In the face of this complexity, and given the many other issues a business can be dealing with when bringing on a new worker, a business owner may be tempted to just make a quick guess on classification. However, not being careful when it comes classification decisions could lead to unpleasant surprises for an owner.
This is because being accused by the Internal Revenue Service of misclassifying an employee as an independent contractor can expose a business owner to major consequences. It could lead to them facing a large tax bill, a hefty interest payment and penalties.
Now, trying to sort through all the factors related to classification is not something a business owner has to take on alone when making classification decisions. They can seek out legal advice on such issues.
Our firm understands how big of an effect tax issues can have on businesses. We can provide guidance to business owners on classification matters and other tax-related matters that have come before their business.