Independent Contractor Classification: Getting It Right
If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. That’s the Internal Revenue Service talking.
Employers should also be aware of the Voluntary Classification Settlement Program (VCSP), a new optional program that provides taxpayers with an opportunity to reclassify their workers as employees for future tax periods for employment tax purposes. This program provides partial relief from federal employment taxes for eligible taxpayers that agree to prospectively treat their workers (or a class or group of workers) as employees. To participate, the taxpayer must meet certain eligibility requirements, apply to participate in the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS.
One way to avoid this is to partner with Bear Staffing to take those independent contractors and payroll them through us. This payroll service is more comprehensive than using an ADP or Paychex payroll service. Bear actually becomes the employer of record for these employees. We pay wages, payroll taxes and workers comp and handle all separation paperwork. You simply pay an hourly rate. While co-employment may need to be examined under this arrangement, it does solve the Independent Contractor problem for some companies.
Contact us and we’ll be happy to provide you with further information.