Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Month: May, 2014

20 Factor IRS Test used for Misclassification

by G. Spencer Mynko, Esq.

20 Factor IRS Test used for Misclassification.

20 Factor IRS Test used for Misclassification

by G. Spencer Mynko, Esq.

I’ve been writing mostly about EDD these days, but given the cooperative relationship and understanding that EDD has with the IRS, I think its worth talking about what the IRS looks for in determining whether a worker is an Employee or Independent Contractor. The IRS employs a 20 factor test to determine independent contractor status under the Internal Revenue Code. These factors generally relate to  evidence of behavioral and financial control and  the nature of the worker’s relationship with the employer. 

The twenty factors are: 
 
1. Whether the worker is required to follow the company’s instructions. 
 
2. Whether the company provides training to the worker to accomplish the work. 
 
3. Whether the worker’s services are integrated into the company’s regular business. 
 
4. Whether the company requires that the worker perform the services personally, as opposed to assigning work to others. 
 
5. Whether the company hires, supervises and pays the worker’s assistants. 
 
6. Whether there is a continuing relationship between the company and the worker. 

 

7. Whether the company sets the worker’s hours.   

 

8. Whether the company requires the worker to work full-time.   

 

9. Whether the worker works at the employer’s place of business.   

 

10. Whether the company sets the order or sequence of the worker’s work.  

11. Whether the worker is required to provide oral or written status reports to the company.   

 

12. Whether the worker is paid by the hour, week or month, rather than upon completion of the project.   

 

13. Whether the worker is reimbursed for business or travel expenses. 

 

14. Whether the company provides the employer with tools and materials.   

 

15. Whether the worker has made a significant investment in performing the services.   

 

16. Whether the worker can realize a profit or loss.   

 

17. Whether the worker works for more than one company at a time.   

 

18. Whether the worker makes the services available to the general public.   

 

19. Whether the company has the unilateral right to discharge the worker. 

 

20. Whether the worker has the right to terminate the relationship without being liable under contract.

  

Call Transportation Attorneys so we can tell you what side of the Independent Contractor/Employee fence you will fall on if you get audited by the IRS!

 

We hope that once you utilize Transportation Attorneys to help you get your IC agreements and business model set up, you’ll enjoy many miles of trouble-free trucking.  If you find yourself in trouble, you can turn to Transportationattorneys.net to fight for you. We are one of the few law firms that focuses on trucking, transportation and logistics with the knowledge and experience to competently guide you through these ever present hazards.  We are very experienced in dealing with the distinctions between independent contractors and employees.

We here at Transportation Attorneys can help you with your Independent Contractor business model and your ability to withstand  the toughest scrutinization of anyone alleging your company is misclassifying its drivers.  

 

Contact Transportationattorneys.net today!

EDD Auditors are becoming very sophisticated investigators and interrogators of truckers and trucking companies.

by G. Spencer Mynko, Esq.

EDD Auditors are becoming very sophisticated investigators and interrogators of truckers and trucking companies.

 

A recent EDD auditor impressed me with his detailed knowledge of trucking and in-depth investigation of a trucking company.

The Auditor clearly understood the distinction between an employee driver and an owner-operator.  The auditor did his home work:  He checked business licenses, secretary of state information, USDOT/SAFER and looked for related or “sister” companies under the dreaded “Unity of Enterprise Theory”.  Unity of Enterprise, or “UE” as it is commonly known, refers to Unemployment Insurance Code Secs. 135.2 and 1127.5.

Sec. 135.2 codifies the concept of unity of enterprise, authorizing EDD to consolidate multiple businesses into a single employing unit for the purpose of determining the rate of employer contributions.  In other words, if one of your companies gets audited, EDD can look into any of your other companies and audit them.  Period.

The auditor wanted a complete list of every driver for all statutory quarters going back three years.  The auditor wanted the Independent Contractor Lease Agreements,  and then turned to the details of the relationships the company had with the drivers.  Basically the auditor was interested in how tightly the company controlled the drivers.

The auditor also looked into whether the drivers were “genuinely in the the trucking business”:   Did they have appropriate licenses, registrations, insurances, advertisements, etc. that would indicate the trucking company was dealing with an independent business (as opposed to simply an employee driver).

The auditor conducted detailed interviews with drivers about the contracts, assignments, and dispatch.  The auditor was particularly interested in the type of instructions and demands the company would make upon the drivers.  The auditor inquired about whose authority was being used to haul loads.  After conducting these interviews, the auditor concluded that the company had the right to direct and control the the services of the drivers and they were, ultimately, misclassified employees.

What was particularly troubling is that the drivers and the company owner were not adequately prepared to answer the auditor’s questions.  A big reason for the auditor’s conclusions was the answers he was given to his questions.  Don’t let this happen to you.  Let us help you make sure all indicators point to a true Independent Contractor / Owner Operator Driver.  And by all means, never talk to an auditor without talking to us first.  These people know how to skew the facts, put words in your mouth, and get you to say things that support their version of the truth.  Ideally, that’s why you should have a lawyer or experienced representative appear for you at an EDD audit.  When you hire Transportation Attorneys to represent you get both: Mr. Mynko and Mr. Beckett will represent your company in the best possible light, answer the auditor’s questions with skill and caution, and protect your interests to greatest extent possible.
I entitled this article “EDD Auditors know what questions to ask in misclassification audits”.  The question you should be asking yourself, is “Should I be answering these questions or let a skilled representative handle it?”   Steve and I see these guys coming a mile away – let us be the wall to protect you from the attack.
You can rely on us to help you with your Independent Contractor business model.
We hope that once you utilize Transportation Attorneys to help you get your IC agreements and business model set up, you’ll enjoy many miles of trouble-free trucking.  If you find yourself in trouble, you can turn to Transportationattorneys.net to fight for you. We are one of the few law firms that focuses on trucking, transportation and logistics with the knowledge and experience to competently guide you through these ever present hazards.  We are very experienced in dealing with the distinctions between independent contractors and employees.

When Transportation Attorneys looks at your business, we consider the same criteria EDD, Plaintiffs attorneys, Labor Commissioners, Judges and other labor law experts will look at to determine whether a driver is an independent contractor or an employee.

We here at Transportation Attorneys can help you with your Independent Contractor business model and your ability to withstand  the toughest scrutinization of anyone alleging your company is misclassifying its drivers.

Contact Transportationattorneys.net today!