Protecting your Equine Business Through Knowledge

January 24, 2013

Independent Contractors: An Introduction - Part One of a Three Part Series

As I visit equine operations I find that most operate under the assumption that their employees are all legal and being paid according to the law. There was a recent court case, in which a worker who was injured on the job had been working for a farm for two years classified as an independent contractor, however when trying to get workers compensation it was discovered the employee was not covered. The farm had the worker sign all qualified documentation, but the employee sued for $1.7 million dollars. The court found the farm guilty of failing to secure workers compensation and failing to provide a safe work place. The court awarded the employee $274,000.00 dollars. Now that attorneys have actual court cases to refer to, the equine industry sits with a bulls eye on its back. Not only is there case law, the judgment does not include the potential IRS penalties of back taxes and investigation of other employees on the farm. Recently the IRS hired 2,000 new agents to identify misclassified employees and collect unpaid payroll taxes.

I hate to say it but the equine industry is ripe for the picking. Most equine businesses treat their employees as “independent contractors” or 1099 employees. The question you must ask is ‘Do they meet the standards of the definition of an employee or independent contractor?’
It can be very difficult to classify a worker as an independent contractor. All companies are subject to possible audit and it is very likely that the IRS will re-classify independent contractors as employees during this process, which ultimately will force the employer to pay taxes and back-tax on behalf of the independent contractor.

Crown Equine Services staff can protect your company, help you manage your contingent workforce and remove the liability for re-classification, taxes, and insurances.

In the next article I will discuss the 20 IRS qualifiers for an independent contractor.

Ben Donaldson
Vice President of Equine Operations
Crown Equine Services

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