State and federal government agencies audit employers for a number of reasons, including for example immigration, workers’ compensation, wage and hour, and employment payroll tax withholding compliance. The usual agencies are the California Employment Development Department (EDD), the California Labor Commissioner, Division of Labor Standards Enforcement (DLSE), the Internal Revenue Service (IRS), and the federal Department of Labor (DOL). Increasingly, government agencies have been cracking down on what they call “misclassification” audits. The “misclassification” they are talking about is the alleged misclassification employees as independent contractors. The government agencies most likely to conduct misclassification audits are the EDD and the IRS.
Who is an “independent contractor?” This is a very misunderstood question in employment and labor law. And no, just because you “1099” them does not make them an independent contractor.
There are legal rules that determine who is an independent contractor. And if the worker is not an independent contractor, they are your employee.
Just because you meet the legal test …
Your tax dollars at work – the federal Department of Labor (DOL) has increased its budget request 16% in 2010 and 25% in 2011 over the 2009 budget (all you smaller business owners out there can groan out loud!).
Part of the reason for the requested increase in budget? So they can bust your company for misclassifying, according to them, “employees” …
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