Mackall, Crounse & Moore, PLC has joined Dewitt Ross & Stevens S.C.

The newly formed DeWitt Mackall Crounse & Moore S.C. will provide clients with enhanced legal services
and efficiencies as well as access to more than 100 attorneys practicing in nearly 30 areas of
law in Wisconsin and Minnesota.

Dismiss this message

×

News & Education

Back to Business Law Articles

Filter by:

IRS and Department of Labor (DOL) Guidelines for Independent Contractors

Even though the news may be filled with stories of impeachment, who insulted who and which Twitter feed was the most offensive, as Entrepreneurs the world continues to go on and these are just distractions that keep us from achieving our goals.

With the challenges in finding employees, many of us turned to using independent contractors. Unfortunately, with the changes made by the Department of Labor and the IRS, as to the guidelines for independent contractors, there are risks in using independent contractors.  Under IRS and Department of Labor (DOL) guidelines: 

  1. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.
  2. Someone is not an independent contractor if they perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if a “contractor” is given freedom of action.
  3. DOL will look to see if the independent contractor exercises “behavioral control” and “relationship of the parties” as to employees. Examples: training, leading, evaluating, hiring, firing, etc.
  4. In general, independent contractors are not supposed to oversee company employees.

If the IRS or DOL decide that someone is not an independent contractor, they have the right to “reclassify” that person as an employee. If that happens, the entire compensation paid for the prior 3 years will be treated as wages. 

If that happens, here are the penalties to consider: 

  • 20% - 40% of all contract payments and compensation, plus up to 100%of what should have been the FICA contributions for both employee and employer
  • Up to $1,000 in criminal penalties per misclassified employee, per year
  • Up to 1 year in prison, per year of violation

The use of independent contractors is still a good idea, but be certain to follow the rules. 

About the Author

Phillip J. Addis works heavily in the area of creditors rights in state courts and in bankruptcy, while also serving as contract corporate counsel for assorted small businesses, community banks and credit unions. He has successfully negotiated developers’ agreements with various municipalities in Wisconsin and Minnesota.

He can be reached by phone at 608-784-1355 or by email at pja@dewittllp.com.

Our Locations

We are currently limiting the amount of outside visitors to the firm.  

Please work directly with your attorney who will coordinate any onsite visits to ensure the safety of our clients and colleagues.

Madison

2 East Mifflin Street, Suite 600
Madison, WI 53703
(608) 255-8891
Get Directions

Greater Milwaukee

13845 Bishop’s Drive, Suite 300
Brookfield, WI 53005
(262) 754-2840
Get Directions

Minneapolis

2100 AT&T Tower,
901 Marquette Avenue
Minneapolis, MN 55402
(612) 305-1400
Get Directions


Get to know us

DeWitt LLP is one of the ten largest law firms based in Wisconsin, with an additional presence in Minnesota. It has nearly 140 attorneys practicing in Madison, Metropolitan Milwaukee and Minneapolis in over 30 legal practice areas, and has the experience to service clients of all scopes and sizes.

Our People
Our Law Firm
Leadership
Areas of Expertise
News & Education
Contact Us

Partners

We are an active and proud member of Lexwork International, an association of mid-sized independent law firms in major cities located throughout the Americas, Europe and Asia and an active member of SCG Legal, an association of more than 140 independent law firms serving businesses in all 50 state capitals and major commercial centers around the world.

Awards

Best Lawyers 2013 – 2018
Compass Award 2012
Top 100 Lawyers: National Trial Lawyers Association

NOTICE

While we would like to hear from you, we cannot represent you until we know that doing so will not create a conflict of interest. Accordingly, please do not send us any information about any matter that may involve you until you receive a written statement from us that we represent you (an “engagement letter”). You will not be a client of the firm until you receive such an engagement letter.

The best way for you to initiate a possible representation is to call DeWitt LLP at 608-255-8891. We will make every effort to put you in touch with a lawyer suited to handle your matter. When you receive an engagement letter from one of our lawyers, you will be our client and we may exchange information freely.

Please click the “OK” button if you understand and accept the foregoing statement and wish to proceed.