The New IRS and Contracted Employees

The new IRS and Contract Employees!

2012 is a new year. The same technology which has aided each of us in accomplishing amazing personal and business goals in 2011 is no longer the same in 2012, it continues to change. Technology is more interactive, capable of intuitive manipulation and interwoven into the very framework of our personal and business lives.

As we consider these grand marches, please do not believe the Internal Revenue Service (IRS) has stayed connected with the past. The IRS continues to progress in a massive installation and upgrade of it’s technology and the people who use it. No longer a cost center, the IRS is now a profit center for “the people”.

Small business should prepare itself to be more diligent with filing informational and tax forms. The most important area of consideration is in employment taxes. The IRS is increasing their technological scrutiny of forms and their interconnectivity. Payroll forms 940, 941, and W2 should all tie together, but often enough they do not.

This scrutiny involves all aspects of employment, including and of special interest, contract employees. If you or your business rely on contract labor, check your facts of employment against the contractor test to make sure you are claiming them appropriately.

Do not believe the IRS is the same entity of 2011 or 2010. The Service is faster, smarter, and better equiped to do their job than ever before. The newer smarter IRS has a voracious appetite to assess penalty and interest and is reluctant to abate after assessment.

Comparing the IRS of today with that of five years ago would be like comparing my first Radio Shack computer in 1984 to my son’s Xbox-Live.

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