Small Business Startup News

Small Business Expert Gives Advice

Written by Jenna Weiner
Published: 8/31/2010

Who is considered an independent contractor?

Small business owners may be putting themselves at risk by classifying certain workers as independent contractors, according to one small business expert.

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In a recent Q&A column for the Los Angeles Times, a small business owner asked Karen Klein if it would be a problem to classify former employees as independent contractors because they did not work for her in a full-time capacity. Klein warned that although reclassifying workers would save businesses 10 percent on payroll taxes, it also posed a risk of coming to the attention of the IRS. She said that, according to T.J. Moore of Citrin Cooperman, entrepreneurs could be faced with an unemployment tax audit - a headache for anyone.

"With states desperate for revenue, more small companies are being audited," Moore said, according to the news source. "If an audit determines that you've misclassified an employee as a contractor, your business could be hit with back taxes and fines."

While business have been trying to save money by reclassifying workers, the federal government is doing more than in previous years to help them out. In the latest news for small business, the U.S. Small Business Administration announced that in 2009 the federal government gave $96.8 billion in contracts to small business owners.

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