Hello 

The IRS just announced that they are hiring another 87,000 employees.  That means your chance of audit is going through the roof.  To put it in perspective, the IRS has gone from a budget in 2021 of about $12 billion to a budget in 2022 of over $100 billion. 

One of the targets will be the old issue of what qualifies as an independent contractor versus an employee.  If you are hiring people as independent contractors, you better make sure you have dotted your i’s and crossed your t’s.  The penalties for screwing up the distinction between the two are huge. 

I have done a YouTube on the difference between independent contractors and employees.  Employers are hiring people as independent contractors in order to avoid paying the employment taxes and benefits for them, but are they really independent contractors?

This question affects real estate rehabbers and investors. Are you hiring someone to help with the work or keep maintenance up in the units?  The list goes on.  The distinction between an independent contractor and employee hinges on a number of tests.  Make sure you get it right.

If you have paid someone as an independent contractor (1099 status), the IRS will assess 100% of the taxes to the employer – even if the “independent contractor” has paid their taxes.  Plus, you will be hit with penalties and interest.  It can get really ugly. 

The IRS isn’t above extortion either.  They will say the guy is an employee and it will cost you more to fight the IRS and prove the guy is actually an independent contractor than it will to pay the IRS bill.  Be careful on this one because the new agents will be trying to squeeze every dime out of you. 

Check out the YouTube.  The big issue the IRS is watching for these days is a business license test.  Does your independent contractor have their own business license?