In an article published on June 13 in Construction Executive, Greg Seador discusses how construction companies can reduce risk of an audit and avoid incurring costly penalties by accurately classifying workers.
“While using independent contractors instead of employees on a job can lower labor costs by 20% to 40%, construction companies should recognize that deliberately misclassifying workers as independent contractors can result in hefty penalties and the assessment of additional taxes and interest if the business is audited by the government,” he shares.
Seador explains that the Internal Revenue Service (IRS) uses three factors to determine the classification of a worker: Behavior control, financial control and the relationship of the parties. “Employers must weigh all of these factors when making a determination about whether a worker is an employee or an independent contractor,” he says.
As federal and state tax authorities continue to pursue construction businesses for misclassifying employees, it is imperative that businesses ensure compliance. Paying careful attention to how employees are classified and paid, as well as keeping good records, is a sure way to reduce the risk of costly penalties, taxes and interest.
For the full article, click here.