Posted on 2/18/2010, 2:19:11 AM by reaganaut1
Federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors.
President Obama’s 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years. More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers.
Many workplace experts say a growing number of companies have maneuvered to cut costs by wrongly classifying regular employees as independent contractors, though they often are given desks, phone lines and assignments just like regular employees. Moreover, the experts say, workers have become more reluctant to challenge such practices, given the tough job market.
Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes for those workers. Companies do not withhold income taxes from contractors’ paychecks, and several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income.
One federal study concluded that employers illegally passed off 3.4 million regular workers as contractors, while the Labor Department estimates that up to 30 percent of companies misclassify employees. Ohio’s attorney general estimates that his state has 92,500 misclassified workers, which has cost the state up to $35 million a year in unemployment insurance taxes, up to $103 million in workers’ compensation premiums and up to $223 million in income tax revenue.
“It’s a very significant problem,” said the attorney general, Richard Cordray. “Misclassification is bad for business, government and labor. Law-abiding businesses are in many ways the biggest fans of increased enforcement. Misclassifying can mean a 20 or 30 percent cost difference per worker.”
Employers deny misclassifying workers deliberately. The businesses say the lines are unclear between employee and independent contractor.
(Excerpt) Read more at nytimes.com ...
They should just start with Obama’s administration. How many tax cheats has he employed?
Contractors are not a tax dodge, its just that the contractor has to pay their own taxes.
There are the misclassified and those that are just paid in cash. Judging by the workers around our neighborhood. Gardeners, landscapers, handymen, plumbers, electricians and contractors..many are working for cash. With people willing to do it and employers who are squeezed..plus the illegals have been doing this for years..might as well join the party.
The Fed gets their taxes one way or another....I doesn’t matter if it’s withheld.
This sounds like a red herring.
Law-abiding businesses are in many ways the biggest fans of increased enforcement.
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Does that translate...UNIONS?!
Businesses and citizens are taxed to death to pay for illegals and union govt workers.
Obama wants no private sector employment.
In regards to legitimate contractors, yes, that is correct.
But employers classifying hourly employees as 'contractors', and handing out 1099's, is abusive of both the tax system, and the employee. It is illegal, also.
Or how about hiring contractors and charging it to a business expense that doesn’t come up as employee overhead in order to slip around SOX and cook the books?
If the employee is okay with it, I don’t see the problem.
well said.
btt
Post Office has been doing this for years. Cut jobs at HQ then bring back retirees as contract employees. Example - bring back a retired Manager of Injury Compensation to work with the Postal Inspection Service to assist in investigating Workers Comp recipients and their continuing eligibility. By designating them contract workers, the hiring agency avoids paying benefits and the employee avoids a dollar per dollar geveback of their federal pension.
>> Contractors are not a tax dodge, its just that the contractor has to pay their own taxes.
For the most part you’re absolutely right. As long as the contractor is a citizen with a real SSAN, the IRS gets “their” money, including all the social security, from *someone*.
The problem in “these parts” is that a LOT of illegals are hired as “contractors” and 1099’d — with the 1099 address and SSAN clearly bogus.
In this way, the scum that employ them are off the hook with the IRS — yet of course the illegal doesn’t pay any taxes whatsoever on the income.
geveback = giveback
The taxes still get paid by the employee on their salary stated on the 1099.
I know a Real Estate broker who treats his agents like slaves while claiming they are all self employed.
Ahhh but you see, Contractors don't get withholding in their checks and thusly have to PAY taxes (actualy write a check to the government)
The government can't allow this because as more and more people opt to be Contractors more and more people see through the scam that is withholding!
I am a business owner, and I both have independents work for me, and I work as an independent receiving jobs and pay without the withholding of taxes. Why would anyone want to pay the exorbitant amount for L&I, unemployment taxes and the like, when you can pocket more money to save for down times, and purchase MUCH BETTER disability insurance that not only pays you when you are injured, but pays BETTER than L&I, for approximately $5 a day, not $3 an hour. It is a legitimate structuring of a business, legal and quite common in construction trades. Just building a house, you have independent heavy equipment operators, surveyors, septic installers, concrete finishers, carpenters, electricians, plumbers, drywallers, painters, floor and tile guys, hvac guys, landscapers etc. These govt fools are gonna end up pushing so hard, that people will fight back and get rid of ALL withholding. Screw them, is it time yet?
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