News

 The IRS is tracking down companies that violate rules used to determine whether workers are employees or independent contractors for tax purposes. The IRS has 33 states that will share data from payroll tax exams, which will likely mean thousands of new employment tax audit leads. They have also developed an electronic matching system that will let the IRS spot businesses issuing 1099 forms with payments of $25,000 or more to at least five workers with no other income sources. Along with this is a new form 8919 that taxpayers can file with their 2007 tax returns that indicates to the IRS that the taxpayer believes they are incorrectly classified.

Companies that are contacted by the IRS must be able to show they filed 1099s on their workers and treated similarly situated workers as contractors as well as have a reasonable basis for classifying them as such. Reduced IRS penalties apply when misclassification is not intentional.