Estimated Tax Tip Savings: If the IRS rules that your “independent contractors” are actually employees, you may be liable for tens of thousands of dollars in retroactive federal employment taxes, interest, and penalties. But you can eliminate this risk of retroactive punishment by meeting three requirements of Section 530’s safe harbor provision.
Let’s say that, in good faith, you classified some workers as independent contractors. But the IRS arrived for an employment tax audit and now concludes that those workers are really employees.
The IRS wants you to pay—big time. But here’s some good news: You can avoid paying tens of thousands of dollars in back employment taxes, fees, and penalties if you qualify for Section 530 protection.
With proper planning, you can hire workers on your terms as independent contractors, reap tax benefits, and protect worker status before, during, and after an IRS audit.
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