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The use of contractors rather than employees: the IRS does it too

We frequently discuss tax issues regarding worker classification in this blog because the IRS has made efforts to detect alleged worker misclassification such a focus in recent years.

Indeed, it isn't only the IRS that has made this a priority. As we discussed in our September 16 post, a number of state revenue agencies have made misclassification a priority as well.  

But here is the glaring irony: the IRS itself uses hundreds of contractors.

The IRS presumably does this for the same reasons that private employers do. It is expensive to hire a full-time employee and pay Social Security taxes, Medicare taxes and all of the other employment taxes that the tax code currently places on employers.

This week, a federal audit showed that many of the contractors that work for the IRS have significant tax debts. The Treasury Inspector for Tax Administration (TIGTA) found that about 5 percent of the IRS contract employees who were included in the audit had tax debts that should have excluded them access to IRS work facilities.

The TIGTA report also found that the percentage of contract employees with tax debt is higher than the percentage for regular employees with tax debt. This is because, given the status of the IRS as the tax collection agency for the entire nation, IRS employees are generally held to strict guidelines for taking care of their own taxes.

And yet, as TIGTA found, the IRS still makes use of many contractors who have not been held to those same standards. This practice is merely one example of how strong the pressures to use contractors can be, even for the IRS.

Source: The Hill, "Audit: IRS contractors rack up tax debts," Bernie Becker, Oct. 23, 2013

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