The Government is Gaining More Visibility into your Independent Workforce…Shouldn't You?

Wouldn’t it be nice to find competent workers, convince them to work for your company and never have to fill out any more paperwork than an employment contract, a check and a 1099?

If only.

As of June 5th, add West Virginia to the existing 14 states which require independent contractor new hire reporting (once required only for employees).  And naturally, each state, as with employee new hires, has unique reporting requirements.

The fines however, are fairly uniform – ranging from around $25 (unintentional failure to report) to $500 (conspiracy not to report).  Further, reporting is championed as an accurate method for enforcing child support obligations.

Who could argue with that?

Nebraska uses independent contractor new hire reports as an unemployment insurance anti-fraud measure.  And West Virginia’s Bureau of Employment Programs and Workers’ Compensation Commission will apply new hire reports to employment security and workers’ compensation programs, as well as by determining eligibility for federally funded programs such as Medicaid.

But what these 14 states don’t mention is that nine have signed information sharing agreements with the IRS, and four have signed memoranda of understanding with Department of Labor under last year’s independent contractor Misclassification Initiative.

Misclassification can amount to hundreds of thousands of dollars in fines from the IRS, $25,000 from certain state agencies, and exposure to multimillion-dollar class actions for back wages, overtime, benefits, civil penalties and attorneys’ fees.

Now that the government has more visibility into your freelancers, consultants and independent contingent workforce, shouldn’t you?

For more information on securing independent contractor compliance, go to ICon.

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