There is a nationwide crisis affecting the Construction Industry.
This crisis is the misclassification of "Employees" as "Independent
Contractors". Many Contractors use this type of misclassification to
secure construction projects by not including into their bids the
payroll taxes, unemployment taxes, other state taxes and workers
compensation premiums. This is an unfair advantage to the
contractors that play by the rules and pay their required taxes,
thus enabling cheating contractors a unfair advantage in securing
Workers classified as Independent Contractors also lose out by not
having the protections that Employees have. Workers that are
misclassified as an independent contractor do not have the
protection of workers compensation, unemployment benefits or Social
Security or Medicare benefits on their income. Workers that are
misclassified as independent contractors are responsible for all
taxes on the income earned from being classified as independent
contractors, but that depends on being sent a Form 1099
Miscellaneous by the Employer or Contractor. Many of these 1099's
never get reported or submitted on tax returns. These misclassified
workers also do not have any worker protections under the National
Labor Relations Act or the Department of Labor.
Employers or workers should use the IRS Form SS-8 (Determination of
Worker Status for Purposes of Federal Employment Taxes and Income
Tax Withholding) in determining independent contractor/employee
status . Workers that submit this form to the IRS will require the
employer to be notified. The Employer will have to fill out this
form and submit this form for determination of classification. If
the worker is determined by the IRS not be properly classified as an
employee, then the contractor may be required to pay all the
Employer taxes and penalties and the employees share of taxes also.
There are many studies that show the revenue loss and impact to the
federal government and to the states. Losses are in the hundreds of
millions of dollars in taxes and workers compensation premiums.
Congress has held hearings this year in relation to this issue. Many
states have enacted or considering the implementation of laws that
includes severe penalties and including criminal charges for
intentionally misclassifying employees as independent contractors.
Worker Misclassification News