Tax Scheme Jail Time
Worker Compliance Tipping Point
At the risk of sounding like Chicken Little, I foresee that we are at the tipping point for compliance with regard to worker classification. There have been a multitude of recent events indicating a push towards stricter enforcement of worker classification at both state and federal levels. As the spotlights have turned towards cases involving this subject, the enforcement has become stricter and heftier repercussions being dealt to those who continue to misclassify workers. Ignorance is no longer a defense.
A recent groundbreaking study from Cornell University has offered high profile enforcement as a potential solution to the growing misclassification issue, noting that high visibility enforcement will send a powerful message to those who now abuse the system or are tempted to do so.
Avoiding Employment Taxes
State of New York Comptroller Thomas DiNapoli cited ‘confusion’ as the potential cause of a major investigation into his offices policy that has resulted in many politically connected professionals getting undeserved public pensions throughout the state.
According to the Better Business Bureau, in January of this year alone, four business owners were fined as much as $4.2 million and received prison sentences of up to 48 months for failing to pay employment taxes. Some of businesses were charged with paying employees under the table and others were involved in elaborate schemes to avoid paying employment taxes.
In the end, it becomes less about how much money can be saved by classifying workers correctly and more about preventing unwanted scrutiny, low morale and negative media attention. There is much to be said for doing the right thing and running your business correctly and in accordance with the law.
One Comment
Comments are closed.
Sounds like the Underground Workforce is Alive and Well…..
The State of California’s definition of the Underground Economy is a term that refers to those individuals and businesses that deal in cash and/or use other schemes to conceal their activities and their true tax liability from government licensing, regulatory, and taxing agencies. Underground economy is also referred to as tax evasion, tax fraud, cash pay, tax gap, payments under-the-table, and off-the-books.
http://www.edd.ca.gov/taxrep/txueoind.htm
California’s Solution to the problem:
The Employment Development Department (EDD), Joint Enforcement Strike Force (JESF), combats the underground economy by pooling resources and sharing data among the State agencies that enforce licensing, labor, and tax laws. The members of JESF include EDD (lead agency), the Department of Consumer Affairs, the Department of Industrial Relations (DIR), the Franchise Tax Board (FTB), the Board of Equalization, the Department of Insurance (DOI), and the Department of Justice. http://www.edd.ca.gov/taxrep/txueoind.htm#Joint-Enforcement-Strike-Force
Then there is the Joint Enforcement Strike Force
Joint Criminal Prosecution occurs where the State and Federal Government join forces and cases are referred to the member’s criminal investigation organizations for potential criminal prosecutions.
The FedEx case is the most recent example of what the State and Federal agencies can do working together. They are committed to prosecuting employers who knowingly and willfully engage in worker misclassification. The IRS challenged the classification of FedEx Ground workers and imposed fines and penalties of $319 million (for 2002 alone). FedEx could face additional penalties totaling over a billion dollars after the IRS completes its investigation. http://www.fedexdriverslawsuit.com
Not worth it!