Despite major reductions in budget since 2010, the IRS has remained vocal about stepping up enforcement actions against employers whose employees are misclassified as independent contractors. The IRS is about to get a significantly expanded workforce to back up these proclamations. In particular, the IRS Commissioner recently announced that the agency is adding between 600 and 700 new employees in its enforcement area. The new enforcement positions will be located around the country, both in the IRS small business/self-employed division and large business and international division.
It is no secret that over the last several years the IRS has been taking a variety of steps to recover what it estimates are billions of dollars in lost tax revenue due to the misclassification of independent contractors. For example, in early 2014, the IRS promoted a program that allows individual workers to file a Form SS-8 to initiate a review of their independent contractor status if they feel they have been misclassified. The IRS announced in June 2014 that it is increasing its corporate audits of S corporations because it has found that many are misclassifying their workers as independent contractors. It also entered into a memorandum of understanding with the U.S. Department of Labor calling for collaboration and information sharing on misclassification activities.
While the Commissioner's announcement of new enforcement positions does not earmark any of them specifically to worker classification, it seems very likely that it will match at least some, if not many, of these positions to that on-going enforcement objective. Even more enforcement positions are called for in the Administration's 2017 budget proposal. The Commissioner claims that each dollar U.S. Treasury spends on enforcement positions "typically returns almost $10 to the U.S. Treasury."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.