Article Date:
July 2017

Word Count:



Beating Penalties for Misclassifying W-2 Workers as 1099 Contractors

One potential business tax reduction strategy is to hire independent contractors instead of employees. If a worker’s classification fits within the tax law, it’s a legitimate strategy that can save you thousands of dollars.


Sometimes the classification isn’t clear-cut. You may have thought that you had the independent-contractor classification correct, but when the IRS did the audit, you learned that those contractors are W-2 employees. This can cost you a huge sum of money in back payroll taxes.


This happened to the Mescalero Apache Tribe: the IRS hit it with a large payroll tax bill when it reclassified many of its contractors as employees.


But the tribe fought back and made new law in the Tax Court that can now help you reduce your tax bill if the IRS tries to reclassify your workers as employees.1 ... Log in to view full article.

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