Our firm provides employers with representation for tax audits. If you have recently received a Proposed Notice of Assessment, this means that your business is facing potential fines and penalties for alleged improper tax compliance.
If your company has failed to properly classify independent contractors as employees, this will usually result in a fine that will be requested via a Final Notice of Assessment. After receiving a Proposed Notice of Assessment, you can request a meeting with an auditor to present information illustrating that your worker is an independent contractor. If this avenue fails, then you will be permitted to request an appeal hearing before the California Unemployment Insurance Appeals Board (CUIAB) to challenge the Final Notice of Assessment.
At your appeal hearing, you will be questioned about the facts surrounding your workers and the reasons for your classification of them as independent contractors. There are numerous factors which are considered in order to determine whether a misclassification has occurred. Each state agency generally has a different approach and body of law which is considered when analyzing independent contractor classifications. The CUIAB examines the decisions rendered by the department and determines whether or not they agree or wish to modify the decision.
The totality of the circumstances surrounding the employment of the workers will be analyzed by the judge at your hearing. If you classified your workers as independent contractors, you will need to show that you generally do not exercise the “right to control”. Classification is all about control in the sense that in a typical employer/employee relationship, the employers always exercise and exert control over the employees. For example, the employer will typically tell the worker how he/she will be compensated for their work, the employer usually furnished the tools and supplies required for the work, and the employers typically dictate how the work is to be performed.
On the other hand, true independent contractors are not directly controlled by the party who is hiring them to perform the work or service. Rather, independent contractors have the exclusive right to control themselves and dictate how and when the work will be conducted and performed. They set their own rate of pay and are usually operating their own businesses or companies.
A common conundrum occurs when an employer has both employees and independent contractors performing work for their company. In this scenario, if the independent contractors are performing the exact same type of work as the employees, the workers will generally be considered employees, regardless of the parties’ intent.
A common mistake made by employers is the belief that placing the worker on a 1099 is sufficient by itself to illustrate that the worker is an independent contractor. Remember, the parties’ intent or agreement that the worker is a contractor not an employee is simply not enough. A worker who is paid via a 1099 but who is controlled and governed by the employer, will likely be considered an employee and not an independent contractor.
The Law Office of Cyrus Mor is provides employers with thorough and comprehensive representation with regards to tax audits and appeals before the CUIAB. Our services are cost-effective and personalized and we invite you to contact our office for a free phone consultation. You can speak directly with our attorney about your case and the facts surrounding your classification. Don’t hesitate to ask us questions as you are likely faces large fines if you have a ready received a Proposed Notice of Assessment.
You can contact the Law Office of Cyrus Mor, APC today at (800) 683-5404.