While the new IRS employee classification amnesty program does offer significant tax benefits, it also raises a number of concerns for employers. Issues of concern include:
- Will the States Conform?
Even though the IRS is issuing a closing agreement for the past, it’s not yet clear if the States will follow. Perhaps your state will view participation in the IRS program as an admission for the past!
- Retroactive Benefits
Independent contractors who become employees may be entitled to costly retroactive benefits, such as pension benefits and stock option plans.
- Employee Discrimination
How will your workers themselves react? If they have an objection to the employee reclassification it can lead to discriminatory policy issues.
- Liability Issues
Suppose your “independent contractor” worker was in an accident and a lawsuit is forthcoming. If he was an independent contractor, he’s liable, not you. Reclassifying him as an employee could make you liable.
In light of the many potential pitfalls, we recommend that you consult with one of our experienced accountants and/or an employment attorney. While it may be a great deal for some, it’s always important to examine the whole picture.
To read our blog on the advantages of the program and to see who’s eligible, click here: IRS Employee Classification Amnesty