Posted: Feb 11, 2010 12:37 PM
The Internal Revenue Service and 37 states are cracking down on companies that illegally try to trim payroll costs by changing employees' status to independent contractors, The Associated Press has learned. The practice costs governments billions in lost revenue and can leave workers high and dry when they are hurt at work or are left jobless.
Many who've studied the problem believe it's worsened during the economic downturn - fueling states to be even more aggressive with their recovery efforts. By designating workers as independent contractors, businesses can save as much as 30 percent of payroll. They can also avoid unemployment insurance and workers' compensation payments, as well as the employer's share of payroll withholding.