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The IRS independent Contractor Test Explained




Description


The Economic Policy Institute estimates that 10%–15% of employers misclassify at least one worker as an independent contractor. Whether intentional or not, misclassification is a crime that can result in serious financial penalties, and in some cases, jail time.

Running your business is an exciting venture—until tax season. Among the numerous tax-related issues to consider is whether your employees are correctly classified as employees or independent contractors. It’s critical to understand this distinction, because as an employer, you’re responsible for various tax withholdings and filings. To guide you, the Internal Revenue Service (IRS) has an independent contractor test to help classify workers as W-2 employees or 1099 contractors.

While the IRS has a clear demarcation between employees and independent contractors, it’s still difficult to comprehend every aspect of the classifications. What’s more, some states may operate on a different test beyond the one used by the IRS. And for business based in California, classification is made more challenging with the passage—and subsequent exemptions—of the AB5 law. 

To run a successful and compliant business with independent contractors as part of your workforce, you must first understand how the IRS categorizes independent contractors. This webinar will explain the latest test used by the IRS to classify workers, how states’ independent contractor tests vary from the IRS, and how California’s laws for classifying workers affects businesses with contractors.

In this webinar, we’ll define what an independent contractor is and list examples, as well as explore the pros and cons of being an independent contractor.

It will also cover the tests to determine whether a person is an independent contractor of employer. 

The following tests will be discussed:

  • IRS 20-Factor Test
  • The ABC Test
  • The Economic Realities Test
  • DOL  Test
  • Worker classification test by state

Learning Objectives:

  • Define employee and independent contractor 
  • Identify the categories of evidence used to determine worker status 
  • Describe the use of Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding with IRS  and Form 8919, Uncollected Social Security and Medicare Tax on Wages 
  • Recognize requirements for Section 530 relief
  • IRS 20 Factor Test – Independent Contractor or Employee?
  • How does the IRS determine whether a worker is an employee or an independent contractor?
  • IRS common law test
  • Does the IRS use the 20-factor test for worker classification?
  • ABC test vs. the common law test
  • California’s AB5 law and worker classification
  • What are the penalties for worker misclassification? 
  • How can you stay compliant with the IRS worker classification rules?
  • How to create independent contractor relationships that comply with current DOL, NLRB, IRS, and state agency requirements

Credits and Other information:

  • Recommended CPE credit – 2.0
  • Recommended field of study – Taxes
  • Session Prerequisites and preparation: None
  • Session learning level: Advanced
  • Location: Virtual/Online
  • Delivery method: Group Internet Based
  • Attendance Requirement:  Yes
  • Session Duration: 2 Hours
  • Case Studies and Live Q&A session with speaker
  • PowerPoint presentation for reference

Who Will Benefit:

  • CPA's
  • Enrolled Agents (EAs)
  • Tax Professionals
  • Tax and Estate Planning Attorneys
  • Accountants
  • Registered Agents
  • Tax Compliance Managers
  • Other Tax Professionals
  • Finance professionals


Speaker Profile:
Charles K. Montecino, is a Certified Public Accountant and Certified Tax Resolution Specialist. He has significant experience in helping clients solve their IRS problems, and clients say he does it with patience and, as one client put it, “without making me feel dumb.” In 2008 he received the Top Practitioner Award from the American Society of Tax Problem Solvers.

He is also known as “The Tax Problem Solver” because he solves tax problems!

He works with taxpayers that for various reasons find themselves at odds with the Internal Revenue Service.  He regularly works with those that have unfiled returns, unpaid balances, payroll tax issues, innocent and injured spouse issues and those under audit.

He has spent his 40 plus years career in public accounting, and over 35 of them running his own firm. He has been  a tax resolution specialist for over 25 years. He is a licensed CPA in New Jersey and is also a CGMA, Chartered Global Management Accountant. He serves on the Cooperation with IRS Committee and the Cannabis Special Interest Group with the New Jersey Society of CPAs. He is a member of the American Institute of CPAs, New Jersey Society of CPAs, and The American Society of Tax Problem Solvers.

He earned his accounting degree from Rutgers University. When he is not working, he enjoys watching the Philadelphia Phillies, Philadelphia Eagles  and the Rutgers University football team. He also enjoys golfing, fishing, traveling, reading and spending time with his wife, children and grandchildren.

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