Mountain View, California (EastBayDaily) — Legal blows to corporate giants Microsoft, HP, and Fed Ex has brought 1099 compliance issues into sharp focus. The IRS has also indicated they will step up investigations, and not just into high profile companies.
As companies increase their use of contract labor, they face new risks. Albany’s 1099 expertise is a welcome ally, helping companies protect themselves from misclassification of workers.
Misclassification audits by the IRS are common in markets known for high use of contractors, such as technology. Audits by state agencies are even more likely. They are often triggered when contract workers apply for unemployment benefits after their assignments end or by Workers Compensation claims for job related injuries.
With its recent acquisition of Silicon Valley’s eWork Services, Albany boasts a 20-year record of 1099 compliance and contractor payrolling services for large and mid-size companies. Albany’s expertise is a relief to companies hearing the warning shots of Microsoft, HP and others.
Both federal and state-specific 1099 laws govern the relationship between the companies and contract workers. Employers can unintentionally violate these laws through innocent actions and policies, often resulting in huge penalties. The examples are numerous.
Microsoft was sued by misclassified workers for denial of benefits, including stock options. The company is appealing a $97 million settlement. FedEx drivers in a class action suit claimed though they were considered contractors, they were still primarily under Fed Ex’s control. Fed Ex could potentially owe $1 billion. HP contractors alleged they were forced to work overtime but were not compensated. The class action suit involving 500 contractors could cost HP $20 million in damages.
“Simple actions can make companies vulnerable to 1099 misclassifications,” said Jason Posel, Albany senior vice president. “Requiring a contractor to use a company e-mail address, or to work full-time at the company facility, can indicate 1099 classification non-compliance. Misclassifying workers as independent contractors means the IRS is not receiving payroll taxes, a situation they’ll not ignore.”
Companies may still not be paying attention. Senior executives surveyed by research firm Veritude ranked worker classification almost last among their workplace concerns. Even businesses with a small number of contractors determined as misclassified can find consequences economically devastating. They must pay the IRS all back taxes owed, with interest, plus a penalty of 12% to 35% of the tax bill.
A quick look at Albany’s Compliance Calculator offers HR professionals and executives an insight into their potential penalties from misclassifications risks. Research shows that on average, 62 percent of consultants are misclassified.
Albany has a track record of successfully auditing the classification of its clients’ contract staff. For those who do not qualify for 1099 payment, Albany’s Employer of Record service ensures compliance with the IRS/State guidelines and avoids the risk of contract staff claiming benefits from their clients. Albany hires the workers as its own W2 employees, processing payroll, paying the correct taxes, and providing benefits and covering the workers through its own insurance and workers comp.
Unlike staffing companies, Albany does not source contract workers but lets clients leverage their own referral networks and HR departments to find talent. Correspondingly, Albany charges a fraction of staffing company fees. Albany also offers expertise in workforce management globally, helping companies with HR issues and compliance in whichever country they are doing business.
Albany (http://www.thealbanygroup.com) is a worldwide Employer of Record and contingent workforce management company. With offices worldwide serving clients in over 65 countries, Albany offers a variety of national and international workforce solutions, including payroll and tax services, vendor management, tax and labor law compliance and migration services.
Contact: Jason Posel Senior Vice President 1-800-664-5508 JasonPosel(at)thealbanygroup.com http://www.thealbanygroup.com/usa
This press release was distributed through eMediawire by Human Resources Marketer (HR Marketer: http://www.HRmarketer.com) on behalf of the company listed above.