Articles Posted in IRS

DOL-300x200In order to assure that workers are being classified correctly, the Department of Labor and the IRS are working together to pay close attention to cases involving determination of work status and issuing the correct penalty to employers.

When it comes to doing work for money, employers can classify workers as either employees or independent contractors (IC). These classifications have a significant impact on the costs an employer must take on, as well as the control an employer has over its workers. The main reason employers would try to classify an employee as an IC is due to taxes. According to an IRS publication from 2008-2010,  “Federal employment withholding taxes represent nearly 70% of all federal tax revenue to be paid to the IRS, which seeks back taxes and penalties from employers that wrongly treat workers as self-employed contractors.” That being said, there are many actions in place when it comes to identifying which of these someone should be labeled as, responding to false classifications, and issuing penalties. With the rise in freelance services, this distinction is becoming more essential for society.

When it comes to defining whether someone should hold IC status or not, the DOL and IRS have several overlapping tests that will allow them to determine misclassification. While some states may have a different jurisdiction for working status, these tests are very thorough and effective at defining a general baseline. While these tests are truly impressive, and the DOL and IRS federal and state regulators are doing everything in their power to improve them daily, many professionals believe the simple approach of labeling everyone as an employee when status is not unquestionably apparent is the best approach.

Puerto RicoIn 2011, the U.S. issued $877.9 million in bonds in an effort to build and renovate 100 schools in Puerto Rico. Now the IRS is auditing for four Series 2011 R taxable of school construction bonds that totaled $756.4 million and $121.5 million in Series 2011 T direct-pay qualified zone academy bonds.

In a letter dated February 7th, the IRS notified the Puerto Rico Fiscal Agency and Financial Advisory Authority that it will be examining certain forms related to these Series R and Series T bonds. This information was filed on the Municipal Securities Rulemaking Board’s EMMA website on behalf of the Public Buildings Authority.

The bonds granted for the construction and renovation of these schools were issued in accordance with a provision set by the 2009 American Recovery and Reinvestment Act, which was enacted during the Obama administration.

MASSACHUSETTS WHISTLEBLOWER LAW

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A self-described psychic and spiritual leader Sally Ann Johnson, 41, of Martha’s Vineyard, ran businesses including Psychic Match Inc and Flatiron Psychic, admitted in Boston federal court that she tried to impede the administration of tax laws. Johnson was paid to purportedly perform spiritual cleansing and healing services and repeated exorcisms. Johnson, who told the court she never passed the second grade, called herself a Romani “spiritual consultant.” She said  she had not paid taxes in connection with the money she received as income as well as a gift.“I honestly did not do the right thing,” she said. Sentencing is scheduled for January 17, 2018 and she could face upto three years in prison. In addition, she could also face a fine from $250,000 or double the gain or loss the offense caused.

Johnson, who has resided in New York, Florida, Illinois and at times Massachusetts, faces up to three years in prison. She is scheduled to be sentenced on January 17. Her lawyers declined to comment. According to court papers, Johnson at various times lived with the unnamed woman on Martha’s Vineyard, a favorite vacation spot for the rich and famous.