Willful Misclassification of Independent Contractor Status

The pot is coming close to a boil. A class action suit has been filed in California. One of the many counts charge that a large national mortgage field service firm is guilty of the willful misclassification of independent contractor status. More and more independent contractors are joining this class.

The IRS just opened an investigation of another large national mortgage field services firm. The IRS with make an individual determination of employee vs. independent contractor. It’s no secret that the IRS takes a dim view of employers misclassifying employees as “independent contractors.”  In the IRS view, many employers thrust this treatment on workers so they won’t have to pay payroll taxes.  Taxes are immediate when paid via payroll withholding.

Are you an employee or independent contractor?  You can ask the IRS to rule whether you are an independent contractor or employee.  But remember, the old adage, “Don’t ask the question if you can’t stand the answer.”  The field service representative can ask the IRS by submitting an Form SS-8—a streamlined ruling form.

Any field service representative can fill one out.  Most forms submitted are by workers—about 90 percent. And most forms produce an IRS ruling that the worker is an employee. In fact, in one recent year, 72 percent of Form SS-8 requests the IRS received produced rulings saying: “employee.”  Twenty five percent were closed without ruling, and only 3 percent were ruled independent contractors! Those statistics do not look good for the field services industry,