The IRS announced in May of 2007 that worker classification cases would be a major area of emphasis in 2008. In March of this year the DOL investigated a Texas water company and found that over 200 employees had been incorrect misclassified as independent contractors. The company ended up owing nearly $600,000 for two years of missed overtime pay. The IRS recently delivered FedEx a $319M tax hit due to classification issues.

Is my worker an employee or independent contractor?

Ask these questions:

Do you tell the employee when and where to report to work?

Is the employee given instructions on how the work is to be performed?

Is the work supervised by anyone on your staff?

Is the employee covered by any of your fringe benefit plans?

Have you issued the employee a company ID card?

Are you providing business cards, stationery or other company property?

If yes to the above, the worker more than likely is an employee, not an independent contractor.

Check the IRS 20 Factor Test for Determining whether the worker is an employee or independent contractor. Go to: www.comptroller.ilstu.edu/downloads/20-factor-test-for-independent-contractors.pdf

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