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Contractor Classification for IRS

IRS changed the rules again. These new rules, effective from March, are particularly relevant to recruiters, as they influence hiring practices across various sectors.

Key Determinants in Worker Classification:

  1. Duration of the Job: Assess if the position is temporary or permanent.
  2. Control over Work Execution: Evaluate the degree of control the employer has over the performance of the work.
  3. Worker’s Role in the Company: Consider how essential the worker’s job is to the company’s overall operation.

The administration’s objective is to shift as many workers as possible away from 1099 independent contractor status. This move is a response to the growing concern over unpaid payroll taxes, believed to be a significant issue with many independent contractors not filing income tax returns.

For recruiters, this means adapting to a landscape where the distinction between an employee and an independent contractor is under stringent scrutiny. The broader definition of an employee by the administration as “any individual working for any company in the U.S.” demands a more cautious approach in classifying workers.

The financial implications are substantial, with billions in unpaid taxes at stake. A shift in this classification could mean not only increased tax liabilities for companies but also a potential reduction in their workforce.

As recruiters, it’s essential to stay informed and adaptable to these changes. The way you classify workers could have profound implications on tax liabilities and overall business operations.

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Tricia Tamkin, headhunter, advisor, coach, and gladiator. Tricia has spoken at over 50 recruiting events, been quoted in multiple national publications, and her name is often dropped in groups as the solution to any recruiters’ challenges. She brings over 30 years of deep recruiting experience and offers counsel in a way which is perspective changing and entertaining.

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