Employee versus Contractor Classification

Many small businesses, especially financially stressed ones, cut corners by deliberately reclassifying employees as independent contractors. The carrot given the employees is that they will still be employed. The employer profits from not paying workers compensation, unemployment insurance, social security, and other benefits. The employee, often not even realizing it in advance, ends up paying unemployment tax and receives no unemployment benefits should he or she become unemployed. I won’t even mention the complications resulting from a workplace injury!

The IRS has long-standing rules about employee versus contractor classification which are posted on its website (www.irs.gov). And now the Ohio attorney general,  who claims that this “underground economy” is costing the state hundreds of millions of dollars each year, is cracking down on  these abusive employers.  See the press release from the attorney general’s office.

Will Limkemann