Are You Aware of the Questionable Employment Tax Practice Initiative (QTEP) Implemented By the IRS?
Under QETP, the IRS and 29 state agencies have agreed to share information through a centralized database in an attempt to share resources and encourage businesses to comply with federal and state employment tax requirements. The intent is to disincentivise businesses from classifying workers as independent contractors to avoid payroll tax benefits, and workers’ compensation insurance. Auditors will be looking closely at independent contractor agreements and sharing information via the database.
The difference between an employee and an independent contractor lies in your ability as owner or manager to control how a worker performs the job. If you have the right to direct and control the worker’s job, the IRS says the worker is an employee even if you and the worker have agreed other wise. Key factors include:
- Amount of training provided.
- Amount of supervision needed.
- Compensation method (by the job or by the hour).
- Whether the worker’s expenses are reimbursed .
- Who furnishes the equipment or “tools of the trade.”
- How the worker can be terminated.