Total Risk Assessment for 1099 Independent Contractors

Have Compliance Confidence – Even in an Audit

Secure Talent’s 1099 Risk Assessment gives you visibility into the costs, risk and resources related to your company's 1099 independent contractors. We’ll assess your company’s current 1099 providers to gauge the level of risk if your company was to face an audit, and then provide recommendations for instant and long-term workforce compliance. We boost your internal hiring and classification process with security and efficiency. We'll also create a plan to ensure success in communication, education and change management for an established employee classification program.

Secure Talent’s 1099 audit risk assessment includes vital steps such as:

• A complete 360-degree assessment of your company’s service-provider usage and related procurement methods and expenses.
• A summary report outlining the degree of 1099 risk and potential financial exposure in the event of a federal or state audit.
• A full action plan to address immediate and long-term risk mitigation.

1099 Risk: Engaging Independent Contractors

If you’re engaging 1099 professionals for your company’s projects, you understand the benefits of contractor relationships. But understanding the risks of working with consultants can help you create an effective working relationship to avoid those risks – and an audit.

1099 Risk: Audits

If your company is not properly classifying its ICs or keeping records of the 1099 relationship, it could be at risk for a 1099 audit. Assessments by auditors at the state and federal level such as the IRS have increased during the past years and will continue to do so. Your company may be a target if you’re in an industry that typically engages 1099s.

The Internal Revenue Service has ramped up its auditing efforts in recent years. This is due to the agency trying to collect the millions of dollars lost each year from improper worker classification. This means increased risk for companies engaging independent contractors. Other auditing government bodies that engage in classification assessment include:

• Department of Labor.
• National Labor Relations Board.
• Occupational Safety and Health Administration.

State audits occur more often than federal 1099 audits on average. There are several factors that may put your company at risk of an audit by the state. Assess the following scenarios against your company’s current situation:

• If a former 1099 files unemployment when a relationship has ended with your company, you may be at risk.
• If a 1099 is injured while performing duties for your company and a workers’ comp. claim ensues, you may be at risk.
• If a state tax agency would like to make sure your company’s 1099s have been properly classified under state tax law, you may be at risk.

Our contractor risk assessment service can help you understand the degree of risk your business may be facing with its current 1099 workforce.

1099 Risk: Lawsuits

Many employers likely understand the tax liability for misclassifying workers, but may not know the risk runs even deeper than an audit assessment. 1099 consultants who've been improperly classified as independent contractors and have lost benefits as a result can file a lawsuit. In many cases, class action suits follow when the plaintiff builds a case with other consultants at a company.

A lawsuit can involve claims for the following:

• Back taxes, including employer and employee contributions.
• Benefits that would have been available if the 1099 independent contractor was an employee.
• Access to retirement plans or profit sharing.

A company can incur huge fines and penalties if a government agency or lawsuit proves that the business purposely misclassified workers for any reason. The monetary payouts when a case settles in favor of the consultant can be devastating to all companies, but can put smaller companies out of business.

Other risks involved with engaging 1099s include:

• Potential copyright loss.
• Restrictions on the right to end services.
• Loss of management rights of the 1099 independent contractor.

Disclaimer: The content in this Web site is designed to provide educational information and should not be considered legal advice.

Keep your risk to a minimum in an audit. Secure Talent’s risk assessment service gives you visibility into your 1099 process. Contact us online or by phone at 800.778.0197.