Article about IRS employer audits
January 20, 2010
Many employers should be very concerned about how they hire contractors yet treat them as employees. The IRS has specific guidelines on how to classify a contractor verses an employee, some employers may have ignored (or are unaware) the guidelines in hopes that the letter or visit will never come. The audit in the past has been stimulated by a complaint from the contractor after they discover how much they owe in SE taxes. The changes in the tax receipts have changed this from a complaint driven process to a hunter process.
We have represented a number of clients who have been audited in this area. In one case the audit occurred after a contract employee claimed that they should have been classified as an employee. The result of the audit was in favor of our client, the contractor in this case was clearly free to set their own hours, work for other companies, and did advertised their trade to other companies.
This article is a good read.
http://articles.moneycentral.msn.com/Investing/top-stocks/blog.aspx?post=1563557&_blg=1,1563557