The penalties for misclassifying an employee or a contractor can be very stiff. If you are found to have “willfully” violated the Fair Play Act, you could be subject to civil penalties of up to a $2,500 fine per misclassified employee for a first violation and up to $5,000 per misclassified employee for a second violation within a five-year period. You could also be subject to criminal prosecution for violations with a penalty of up to 30 days in jail and up to a $25,000 fine and debarment from Public Work for up to one year, and that is just for your first offense.
The New Standards for assistance with this question presumes that all workers for an employer are “employees” unless they meet all 3 of the criteria that have now been established.
In addition to this standard, for all sole proprietors, partnerships, corporations and other entities, a 12-part test has been created to assist with determining if an entity should be considered “separate business entity” from the contractor for whom it is providing a service. If an entity meets all 12 of the criteria, it will not be considered an employee of the contractor but instead will be considered a separate business that itself will be subject to the same criteria.
Last year, did you employee a worker as a subcontractor and wasn’t sure if that was correct? Did you issue a 1099 for that person instead of a W-2?
The time to issue 1099s and W-2s is just around the corner. Let the professional team at Custom Accounting Services clear up any confusion for you.
Contact us today at 315-258-8780 for further information on how our team can be of assistance to you.