The State of California and the IRS are desperately seeking alternative sources of revenue, and recently we’ve seen a wave of attention focused on the issue of independent contractors. For many years the standards of what constitutes an independent contractor (from a taxation point of view) has conformed to the outcome of a landmark case in the 70’s. Central questions used to revolve around who had control over determining what work would be done and when, and the provision of tools, equipment and supplies. Recently, the California Department of Industrial Relations posted an article pointing to a recent ruling by the California Court of Appeal, Sixth District regarding the issue of reclassification of employees as independent contractors.
The issue we are seeing isn’t related to an employer or two who have walked in the “gray area” between “employee” or “independent contractor”. We’re seeing clear examples of independent contractors who meet all of the standards established in the previous IRS landmark case, who are still being found by California to be misclassified employees. In one conversation with a tax agency, we were told “we’re not bound by any such rules or those standards.” We had to fight to protect our client and save them a substantial fortune.
Some small businesses have simply caved into the pressure and accepted the assessment by California thinking they’ve resolved the issue, when who should come knocking at their door next? Yes, the IRS. These are extraordinary times, and state and federal agencies are going to new extremes to generate revenues. If you’ve been contacted by the California EDD, any other state agency or the IRS you need the expertise and legal protections we can provide. Call us for a complimentary initial consultation at 866-631-3470 today.
