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January, 2013

The Independent Contractor Dilemma: 1099 vs. W-2

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The Independent Contractor Dilemma: 1099 vs. W-2

The Department of Labor (DOL) and state investigators are cracking down on employers who misclassify employees. In an effort to curb misclassification, the DOL has hired 100 new auditors solely to investigate the correct status of independent contractors.

With their new Misclassification Initiative, the IRS plans to flag employers for audit should they issue both a form 1099 and form W-2 to the same identification number. In addition, the IRS, in its attempt to minimize the “tax gap”, has also begun a coordinated effort of enforcement by sharing information with the DOL and the States.

Determining Classification

Now more than ever, it’s imperative that you are in compliance with the law when classifying independent contractors. According to the IRS Independent Contractor or Employee brochure, here are the steps necessary to determine classification:

Behavioral Control

1. Behavioral Control

Is the employer providing extensive instructions on how, when, and where work is to be done or what tools or equipment to use?

Financial Controls

2. Financial Control

Are the business aspects of the worker’s job controlled by the payer? For example, whether expenses are reimbursed or who provides tools/supplies?

Relationship of the Parties

3. Relationship of the parties

Are there written contracts or employee type benefits, such as a pension plan or insurance? Will the relationship continue and is the work performed a key aspect of the business?

How aps can help

APS has a mission: to make payroll and HR easier. We provide our clients and partners with intuitive technology delivered with personalized service and support. Our unified solution is designed to simplify workforce management tasks. Process payroll in hours, not days. Automate HR workflows to be more strategic. Elevate the employee lifecycle with a single-system platform. We are APS, your workforce partner.

Businesses choose APS as their workforce partner because of our focus on the customer experience. As a result, we continually maintain 98% customer retention and satisfaction rates.

For more information on how we can help make payroll and HR easier for your business, please visit www.apspayroll.com or call 855-495-7921

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