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Corporate Services » Mitigate Risk » Prevent Misclassification
We Protect You From Misclassification Risk
Read about some of the most well known cases of employer misclassification here.
Today, strict guidelines determine who qualifies for 1099 contractor status. Unfortunetly these guidelines are often so confusing and vague that, in a May 2007 report, the Internal Revenue Service (IRS) estimated that as many as 15% of employers misclassified workers as independent contractors.
If an IRS or Employment Development Department(EDD) audit determines your company misclassified an independent contractor, you will be forced to reclassify them as a W-2 employee. When reclassified you'll be held liable for back payroll taxes, benefits, retirement plans, and stock plans since the day that contractor started working for you.
Vendor compliance requires time, commitment, and expertise – and ultimately it is your company’s responsibility to ensure that your process for classifying workers correctly is sound.
IPS can get you there simply and quickly – virtually eliminating 1099 or corp-to-corp misclassification risk for all of your vendors and internally sourced independent professionals - at no cost to your business.
Ensure ongoing compliance of your independent professionals – from the day they start to the day they leave.
In addition to background checks on independent contractors, IPS completes an annual compliance checklist for vendors to ensure their valid status as a corporation. This due diligence separates qualified vendors from those that try to cheat the system – posing a likely hazard to your business.
This process of manual screening ensures a level of compliance validation that is likely not achieved through typical automatic screening practices. In essence, IPS eliminates risk of reclassification by offering attractive, web-based W-2 employment to those vendors and contractors who are not in compliance.
If screening deems the vendor or contractor to be:
Compliant: IPS will sub-contract the independent contractor and issue IRS form 1099
Non-Compliant: IPS converts the contractor to a W-2 classification, becomes the employer or record for the contractor, issues a W-2 and provides the contractor with the perks of owning their own business – without the hassle
With IPS acting as the Employer of Record expect the following measures to ensure compliance:
Payment of all mandatory federal, state and local taxes
Payment of Workers Compensation insurance, State Unemployment and Disability insurance
Adherence with IRS, federal, state and local employment laws including ERISA, HIPAA and EEOC regulations
Documented visibility into the status of your contract workforce for business auditing purposes
IPS reduces the burden on management and reduces risk by performing frequent checks to ensure ongoing independent contractor and vendor compliance, so that your business remains as protected as possible from claims of misclassification and other liabilities.