Worker Classification Compliance Check


The Internal Revenue Service’s compliance checks also include the verification of the correct classification of workers as employees or independent contractors. IRS takes the position that any individual/unincorporated business should be treated as an employee unless the payer can prove otherwise. Proof to substantiate that a worker is an independent contractor includes documentation such as an advertisement, invoice, business card, business license, certificate of insurance, telephone listing, or other documentation that may be required which shows that the worker is truly operating a business.

The Commonwealth of Virginia is also conducting compliance checks to verify that a business has correctly classified its workers. A copy of the business license, certificate of insurance, and W-9 form are required.

The failure to withhold Backup Withholding taxes when required or to misclassify a worker will subject the payer to various penalties. Therefore, to protect your business from the assessment of penalties and taxes, please have a form W-9 on file for every individual or business that is paid for services or other non-employee compensation, interest, dividends, and rents. In addition, for any individual or unincorporated business which is paid as an independent contractor, also have on file documents which show that this worker is correctly classified as an independent contractor. You must have at least a form W-9, copy of the business license, and a certificate of insurance.