Do you work with independent contractors as part of your business strategy? Are you concerned about 1099 workers in San Diego and are you at risk for a substantial misclassification audit? The answer for 1099 employers is yes, significant risk. The US Department of Labor or DOL recently hired 700 new auditors to pursue businesses nationwide for this very thing. The EDD has added it as a primary inquiry in its business and payroll audits every three years. The IRS is carefully reviewing all 1099s looking for misclassified employees. Why all the attention?
Money. Pure and simple. The recent pandemic has dramatically impacted State and Federal government coffers. The State of California and the federal government need revenues, and your business checking account is where they intend to get it. “How can they simply assert misclassification?” you might ask. “What are the new rules for independent contractors and what caused the recent changes?”
If you are concerned about 1099 workers in San Diego you are right to be on the alert. A recent US Supreme Court decision radically changed the paradigm for independent contractor classification. In its landmark decision, the US Supreme Court determined the question was more about the economic relationship between the parties than an issue of control. Companies used to worry about things such as managing of schedule, the provision of tools and equipment and direct supervision of work.
Now, the central question is this: what percentage of the 1099 worker’s income comes from a single source? If your company provides more than 60% of your independent contractor’s wages you will likely face a misclassification audit and face hundreds of thousands of dollars in civil fines, back pay and payroll taxes, unemployment, workers compensation and FICA as well as being forced to pay the 1099 worker for unpaid overtime, benefits offered to company employees and even 401(k) matching. The risk is substantial, and there are specific strategies you can employ to avoid the financial challenge of a misclassification.
If you are concerned about 1099 workers in San Diego we invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
