Formatting is: 1” margins all around, double spaced, Times NewRoman 12-point font.
Assume you are the owner of a small boutique hotel. You want to hire a worker to plan, design, develop, build, install, and maintain a state of the art information technology (IT) system which will be the center piece of all IT operations. You decide to hire the worker as an independent contractor and not as an employee.
You pay the worker a monthly salary and provide her with a credit card so that she can buy parts, equipment, and necessary tools. Assume that three years after you hire the worker, you learn that she/he has not paid any income taxes since the inception of employment. You receive a notice from the IRS that it will be conducting an investigation and putting you on notice that you may be responsible for unpaid taxes of over $50,000.00. To make matters worse, the worker has suddenly disappeared and has left you without anyone with the necessary knowledge, skills, and abilities to manage your IT system. You hear from one of your employees that the worker was threatening to go to the IRS and complain that you worked her over 50 hours per week without paying any overtime. It is true that the worker was on propertymore than 40 hours per workweek, but you didn’t keep track of her exact hours. You’re not sure that you’ve complied with the law and you fear that you may be in trouble.
First, what are the most important facts in the case study and why? Then, what other facts, if true, would help your case? Be specific. Tell me all the things you should have done to protect yourself. Then, tell me what other facts, if true, would hurt your case. What are some common mistakes employers make when they hire independent contractors?
What is the worst thing that can happen if the IRS decides you misclassified the worker? If you did misclassify the worker, who, other than the IRS, will be interested in your mistake? What other penalties might you face?