Wisconsin Construction Contractors

[Jesse]

Effective July 1, 2009

"Willful Misclassification" Penalty for construction Contractors = $25,000 penalty for each violation of misclassification of employee status with intent to evade withholding tax requirement.

Just returned from a seminar with this information.

[Nashville]

Counterproductive Effect

The Wisconsin penalty is a typical knee-jerk desperation move and it is happening everywhere. It is hatched by a government thought process that says "We are the law and we can do anything we want." They will do something like this instead of beefing up their audit departments and getting off their butts and finding these folks.

My own state and surrounding states are doing similar things and wholesale reclassifying independent contractors with disregard for facts.

What is the real result of this? My payroll clients have reduced from 7 to 4. People who used to issue 1099s are hiring Mexicans and paying them $3-$4/hr cash under the table, and simply do not take a tax deduction for them.. One truck driver had 6 rigs with 6 drivers. He laid all of them off and put 5 of them up for sale, and drives the one that is left.

Economic desperation focuses on sources of money. For governments, this not only means taxation of individuals but also gravitating to employers to collect money for them. Then penalizing these employers because they don't have any other way to force the employers to do the States' dirty work for them.

One of my clients got his payroll taxes screwed up by the IRS. He received so many ugly letters that he gave up payroll and put his one employee on 1099-status. State of TN confronted him so he paid the fine and laid off the guy permanently.

Lots of people who used to have employees are doing more work themselves by staying home, hiring their wives to do paperwork, their children, and illegals under-the-table. One of them told me he would do everything himself before he would ever have another payroll.

[Burke]

IRS has entered into agreements with many states to share this info with them. State does the audits, and collects their share of employment taxes (SUTA), then sends the info to the IRS, who then can adjust for FICA, FUTA. Neat, huh?

[S T]

Calif Contractors

Well I know that Calif has Work Compensation Companies due their audits for "violaters" and then EDD (Calif Payroll Collector) assesses accordingly. Double "whamy" for Contractors - they get to pay the extra Work Comp premiums and also the State payroll taxes, plus penalties and interest. For contractors, all subs must have a State Contractors License #, and also provide Work comp Insurance. If that can not be furnished or verified - Contractor pays up!

So that program has worked pretty good in California for California Payroll Taxes - not sure if they are reciporcating yet with IRS.

Sandy