Employers that don’t properly classify workers as employees or independent contractors risk legal trouble. A recent U.S. Tax Court decision found an LLC liable for unpaid employment taxes and penalties. The IRS had determined that the medical practice improperly classified workers as independent contractors over a period of several years and wasn’t entitled to Section 530 relief from employment taxes. In evaluating the claims, the court considered seven factors that generally help determine whether workers are employees or independent contractors. Five factors weighed in favor of the LLC’s workers being employees. Therefore, the court sided with the IRS. (TC Memo 2023-64)
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