Independent Contractors and the Perils of Misclassification: Avoiding State Tax Liability in an Era of Heightened Scrutiny

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

Using independent contractors is attractive to employers for a host of economic reasons, but the current legal environment provides significant—and costly—consequences for errors in worker classification. The federal government and a number of states have intensified their efforts to prevent misclassification, including adopting legislation that imposes severe penalties for employers that fail to classify workers correctly. In this article, Morgan Lewis & Bockius attorneys Larry L. Turner and Joy F. Grese review recent federal and state initiatives to prevent misclassification of employees and provide checklists of best practices for creating and maintaining independent contractor relationships.

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