The Internal Revenue Service announced that it plans to increase their worker classification caseload under the QETP (Questionable Employment Tax Practices) program. This program currently shares worker status and employment tax data with 37 states. The IRS noted that it plans to evaluate more worker status cases after completing an agency-wide national research project which is expected to be completed in 8 to 10 months. In the past 3 years during this evaluation process, about 70% of over 6000 cases have been studied.
The 37 states participating include Kentucky, North Carolina, South Carolina, Virginia, Florida, and Pennsylvania. Source documents utilized in the study include time records, general ledger balances, W-2’s, wage and tax registers, expense reports, payroll checks and payroll account registers. The QETP program was originated in 2007 with cooperation from 29 states and allows state workforce agencies and the IRS to share date in an attempt to ensure proper worker classification.
Government officials estimate that an employment tax gap ranging from $50 to $350 billion dollars exists due to employers misclassifying their work force as independent contractors, thus avoiding payment of employment taxes. Both the IRS and the states are working diligently to ensure proper worker classification in order to collect these un-paid employment taxes.
This action corresponds with additional labor force enforcement actions, such as increased enforcement of OT violations. As noted in a previous Payroll Advi$or article, the number of FLSA cases filed in federal courts has increased significantly.
The Advi$or encourages business owners to evaluate their employment and pay practices for compliance. Time & Pay’s partnership with SESCO is an excellent resource to evaluate your employment practices.