There has been a lot of discussion in the national news regarding the President-elect’s position on the misclassification of independent contractors. Many believe the new Secretary of Labor may dial back the pressure on this hot button issue. If you are a California or San Diego employer we don’t recommend you breathe a sigh of relief, and “hope is not a strategy.” The fact remains the State of California desperately needs tax revenue, and 1099 independent contractor misclassification audits, fines and back tax collection won’t be “Trumped” in California.
The California Employment Development Department or EDD has recently ramped up its efforts to expand 1099 independent contractor misclassification audits as part of their normal audit of California businesses on a 3 year cycle. Any San Diego business with 1099 workers must be prepared to face stiff challenge to the likelihood that a stiff challenge is in the cards. Even the Federal Government, the Department of Labor and IRS audits continue to target these workers.
Why? Because while some employers legitimately utilize 1099 independent contractors on a seasonal or temporary basis, there are a large number of California employers who view 1099 independent contractor misclassification as a non-risk. The EDD estimates that a large percentage of California businesses with 1099 workers either fail to structure or document the relationship with these independent contractors in compliance with California law, or they have no genuine basis for considering these “employees” as 1099 workers. Regardless, the State of California believes these employers have failed to pay billions of dollars in payroll taxes, unemployment and workers compensation premiums.
The local reality is simple: California is desperate for tax revenue, and San Diego employers with 1099 should contact the experienced business, legal and tax attorneys at Allen Barron for a free consultation at 866-631-3470. Learn what has changed over the past few years, and how the basic guidelines for determining the question of “independent contractor or employee” have forever changed.
