The Myth of Incorporated Independent Contractors
Many companies that fail a worker classification audit are caught off-guard – no surprise there. However, many organizations that fail an audit thought they had an independent contractor compliance program in place. These companies would only work with incorporated ICs – no 1099 is filed, and they weren’t working with an individual, right?
Wrong. The federal and state auditing agencies, including the IRS, place as much importance on incorporation in the audit process as they do on an independent contractor agreement – little or none. What really matters is who was providing the services. For example, was it really a corporation providing the services, or was it an individual who happens to be incorporated? Then the auditing agency will look at how the company controlled that individual’s work.
Don’t fall into this common compliance trap. Best practices suggest that companies should evaluate all corporations with fewer than 5 employees for independent contractor compliance.
Who does your company evaluate? Who is falling through the cracks?
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