Adecco 1099 contractor compliance program
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  • To amend the Internal Revenue Code of 1986 to modify the rules relating to the treatment of individuals as independent contractors or employees, and for other purposes. Taxpayer Responsibility, Accountability and Consistency Act of 2009 - Amends the Internal Revenue Code to: (1) require reporting to the Internal Revenue Service (IRS) of payments of $600 or more made to corporations; (2) set forth criteria and rules relating to the treatment of workers as employees or independent contractors; and (3) increase penalties for failure to file correct tax return information or comply with other information reporting requirements. <br />

Adecco 1099 contractor compliance program Presentation Transcript

  • 1. 1099 Contractor Compliance Program The recipient of an Independent Contractor’s services is responsible for providing evidence of an IC being properly classified, not the IC.
  • 2. Causes for Reclassification Enforcement • Department of Homeland Security • Identify undocumented workers • Recent eVerify legislation enforces worker authorization • Applies to all Federal Contractors • Department of Labor • New Administration is extremely ‘labor friendly’ • IRS • 2007 program rewards IC compliance whistleblowers • Announced 6,000 IC compliance audits • IRS estimates it loses $300+B in tax revenue on unreported income • U.S. House of Reps & U.S. Senate • Taxpayer Responsibility, & Consistency Act introduced in 2009 • President of the US • Proposed federal budget for 2011 includes $25M for “Misclassification Initiative” • Expected to increase tax revenue by $7B over 10 years • $8B for the IRS to focus on “critical areas of non-compliance” enforcement over next 5 years Adecco USA - Proprietary and Confidential
  • 3. Contractor Classification IRS “20 Point Checklist” focuses on 3 Main Factors: • Behavioral Control – how much control the employer has over the worker’s behavior and work results • Financial Control – how much control the employer has over finances. Is there any risk of loss? It this project/customer their sole income? • Relationship between the parties – How long is this relationship? Is there a completion date? Adecco USA - Proprietary and Confidential
  • 4. IC Classification Process – Data Gathering Documentation requirements • • • • • • • • • • • 20 Factor Test with independent validation control TAX ID Certificate Articles of Incorporation (if applicable) W-9 Responses to IRS 20 Questions (both the potential independent contractor and the end-user) Certificate of Insurance Letter to Insurance Carrier (notification of change in policy) Consulting Agreement Statement of Work Confidentiality Statement Evidence of business operations such as stationery, business card, website URL, etc. Adecco USA - Proprietary and Confidential
  • 5. Estimated Amounts of Risk* • Worker misclassification where the misclassification is not attributable to intentional disregard of the tax rules. A 1099 is filed and documentation exists to support the IC status. • • Worker misclassification where the misclassification is not attributable to intentional disregard of the tax rules and there is support for the IC classification. A 1099 is not filed due to reasonable cause. • • 12.5% of salary paid penalty plus interest* Worker misclassification where the misclassification is due to intentional disregard of the tax rules, e.g. no classification procedure exists, the employer can be assessed penalties for failure to withhold, employer & employee share of FICA, etc. • • 11% of salary paid penalty plus interest* 13%-66% of salary paid penalty plus interest* Approximately 90% of ICs interviewed / vetted from Adecco Customers under our IC program were converted to W2 status. *An internal analysis of our risk from Adecco’s Tax / Legal department. Provided as a benchmark to assess risk based on current procedure / process / practice. Adecco USA - Proprietary and Confidential
  • 6. Independent Contractor/1099 Compliance Program Adecco Solution Benefits IC Realignment Mitigation of Risk Expertise Proper Worker classification Extensive defined vetting process Insurance & screening compliance Financial Oversight Supporting documentation Change Management Active rate negotiations Streamlined Process Spend visibility for all services Administrative Support Consolidated invoicing & reporting Solution for non-qualified vendors Quality control Adecco USA - Proprietary and Confidential
  • 7. 1099 Classification / Qualification Timeline Week One - Classification Determination Interview Results conduct with sent to Delivered & Instructions Worker & Manager data team sent Interview set 1099 Worker Identified Day 1 Day 2-4 Day 4 - 5 Day 5 Week Two - Qualification Worker Submits Documentation Day 1-2 Documents are reviewed & submitted to Tax and Risk Day 2-3 Tax Determination & Acceptance Day 3-4 AP Vendor Set Up Day 3-4 Adecco USA - Proprietary and Confidential Client & Worker Confirmation Day 5