The IRS is waking up to Contractors versus Employees

As a Business Owner you are always looking for ways to add hours to a day or stretch the money that you’re spending.  One of the ways that companies have traditionally looked to save money is by calling their employees “Contractors” so that they can escape a lot of (a) administration costs and (b) taxes.   The IRS has always had something called the Common Law Test that helped companies determine what the right classification was but most Business Owners simply plead ignorance because of how much money they could save.In December, the Federal Government started to show how serious they were about their new focus on the mis-classification of Contractors by hitting FedEx with a $300+ million fine for 2002 because they (FedEx) were calling all of their delivery truck drivers Contractors. If you think about the last time you got a package delivered you can see why FedEx got in a lot of trouble:

• the trucks are all the same
• every delivery driver has to wear a uniform and keep their key ring on the pinky of their left hand after locking the door of the truck
• their routes are pre-determined every day for them (they have no autonomy) 

As you’ll see in the article that I referenced, the fine that has been levied against them only accounts for 2002.  They haven’t even gotten to the more recent years.  This will likely cause FedEx well over $1 Billion.  For years we’ve been providing Contractor Management services to companies who recognized the potential trouble that they could get into  by calling people Contractors who were really W-2 Employees.  

Tags: 1099, contractors, employees, FedEx, IRS, Microsoft, Taxes