Independent Contractor Compliance Blog - by Collabrus™

Did you know:

• Over 70% of all employment tax audits result in finding misclassified workers?
• The EDD and the IRS win 90% of the cases that go to hearing or trial?
• During this recession, the EDD and the IRS have been getting increased funding to enforce IC compliance?

It is too late to prepare for an audit challenge after you receive the letter or a phone call from the auditor.  The time to prepare is now.

Why?

Audits review past records, where most statutes of limitations for an audit are three years.  That means how you classified your consultants three years ago will be scrutinized today.  Will you be able to prove today what you did three years ago was correct?

You have a good attorney.

Upon receiving a notice of an audit, many companies will call an attorney. Not a bad idea. However, at that point it may be too late; the cow is already out of the barn.

A good attorney (one with experience in the area of employment tax and labor law) can minimize the inconvenience and possibly some of the liability (except his fees); however:

• The audit will still happen.
• The assessment will still be issued.
• The audit results will be shared with other enforcement agencies.
• Misclassified workers may file civil suites.
• Word may get out to your customers and investors.

At best, what any attorney can do is minimize the damage, but the worst damage has already been done.

Wouldn’t it have been better if the audit never happened in the first place?

Enforcement agencies screen businesses to identify and select only those that appear to be misclassifying workers for an audit. Agencies like EDD have special units whose sole purpose is to identify businesses that appear to be misclassifying workers. Enforcement agencies like to know they will make a tax assessment before they contact you. They almost never perform survey, or random, audits.

It’s always possible something will cause your company to be selected for an audit. An expert will know the information and level of detail required to protect you in the event of a challenge. The correct documentation can protect you.

React before you receive the letter.

You should call an expert like Collabrus before that letter arrives. We have the ability and experience to cost effectively help you attract the best talent and properly classify and document their status. But don’t wait until after an auditor or the investigator has called you.

Stay ahead of the curve.