Jun 27, 2015

Slippery Slope: Employee Mis-classifications Lead to Crackdown

A vintage furniture dealer I’m aware of is on a “slippery slope” that may land him in jail. His transgressions? There are several, but the most serious is designating employees as independent contractors that should be classified as employees.
In their search for more revenue, federal and state governments are cracking down on business owners who mis-classify employees, as well as independent contractors who don’t claim all their income. And the penalties for doing so can be serious.
In a 2014 interview, attorney Jeffrey Davine, a partner with Mitchell Silberberg & Knupp LLP, told the website Law360: “If a business mis-classifies a worker and the government ultimately finds they should have been an employee, in theory, the business is responsible for paying all taxes they should have withheld, plus the mis-classified employee’s share, plus interest and penalties … If you multiply that by several employees and several years, the business could be looking at a devastating tax liability.” 

In the same article, Michael Fried, a partner with Fried & Rosefelt LLC, states:

“More recently I’ve seen common, everyday problems turn into criminal prosecutions, as opposed to staying in just the civil arena … In the past you had to really work hard to get criminally prosecuted for failure to pay employment withholding taxes.”

Not any more, apparently. >>>Read More

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