Worker Misclassification: Avoid Risk of Audit and Tax Assessment

Tax compliance requires correctly determining whether you’re paying an independent contractor – or in fact you’re using Accounts Payable to pay a worker who should be classified as an employee or make a payment that should be classified as wages.

These could be former employees who’ve returned to do much the same work on a contract basis.  Or, they could be workers whose payer treats them as “contractors” when factual information puts them in the employee classification and there’s no reasonable basis for not treating them as employees.

Worker classification examinations are a top target of the IRS and state tax agencies, and there’s extensive information sharing between states and the federal IRS and Department of Labor as multiple jurisdictions hunt for noncompliance and to assess uncollected employment taxes.  Errors of worker misclassification carry risk when reclassification is proposed and employers face unanticipated costs of employment tax, unemployment tax and other costs.  A new IRS Revenue Ruling and Revenue Procedure have cast new light on the potential costs of noncompliance.   

This program will show you the factors that count in worker classification including:

• Factors of control and oversight your organization has over the worker 
• Factors that could indicate the worker actively has an independent business 
• The important evidence of business expense reimbursement 
• Factors of how and when the worker is paid by your organization
• The Section 530 safe harbor for fact-based relief from employment tax assessment on past payments to workers who are now being reclassified as employees 
• New Rev. Proc. 2025-10 which expands the guidelines for determining whether a taxpayer did not treat an individual as an employee, for purposes of section 530
• New Revenue Ruling 2025-3 which illustrates, in five fact situation examples, whether section 530 relief, and I.R.C. section 3509 concerning reduced employment tax rates, can apply. 

Featured speaker:

Marianne Couch, JD - Principal, Cokala Tax Information Reporting Solutions, LLC

Marianne Couch, JD, a Principal in the Cokala Tax Group, is an advisor on U.S. federal information reporting compliance.  She is a frequent lecturer at major tax conferences and the author of numerous published articles. She served for many years as Research Director of an information reporting and withholding consultancy where she chaired special training and advisory services provided to large organizations and academic and nonprofit institutions. She was previously a member of the IRS Information Reporting Program Advisory Committee (IRPAC), where she served as Chair of the IRPAC Subcommittee on Small Business and Self-Employed (SBSE) tax issues.  In this capacity, she testified annually before the IRS Commissioner on issues of concern to the information reporting community.  Marianne has previously worked as a litigator for a large Michigan law firm, where she represented individuals and large clients in many types of civil actions, and formerly served as a Research Attorney for the Michigan Court of Appeals.

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