Absolutely! The already multifaceted laws governing the differentiation of “Employee” or “Independent Contractor” is further complicated by the Affordable Care Act’s (“ACA”) employer mandate set to be implemented in 2015. The employer mandate will expand complicated regulations and include increased enforcement actions by the IRS.
The employer mandate requires certain employers with 100 or more full-time employees to provide medical coverage for their employees or pay a tax penalty. These tax penalties are not tax deductible.
The definition of a full-time employee depends on a variety of factors that will require employers to track hours of all employees. The ACA does not provide a coherent definition of an “employee,” therefore the common law 20-factor test will likely apply.
An unintended consequence of the ACA will entice employers who have slightly more than 100 employees to classify some workers as “independent contractors” to avoid the employer mandate. This will not be lost on the IRS when selecting employment tax audits.
Additionally, the IRS currently offers relief for misclassifications of workers; however there are no indications of whether or not the current program will apply to the ACA.
The exposure for incorrect worker classifications can be severe and broad. If you wish to discuss the Service’s employment tax examinations or other worker classification issues, or simply wish to have your current practices reviewed for potential exposure, please contact Brian J. Crepeau at (410) 649-4981 firstname.lastname@example.org.