IRS Hiring Additional Agents, Providing Additional Resources for Misclassification Enforcement

The recent announcement by the IRS Commissioner that the agency is moving forward with hiring hundreds of additional agents has sparked a debate about exactly how those new resources should be utilized. Some leaders in the construction industry have told Construction Citizen that if the government has more people on hand to enforce the law, proper classification of workers should be a priority.

Misclassification is the practice of designating an employee as a "1099 worker" or an independent contractor when that person, by law, should be compensated as an employee.

Unscrupulous employers do it as a way of sidestepping payroll taxes, unemployment taxes, and workers’ compensation insurance. Even though there are many legitimate uses of contract labor, abuse of the classification gives cheating companies an ability to submit lower bids for projects, undercutting ethical contractors who follow the letter of the law.

The Wall Street Journal reported on a memo from IRS Commissioner John Koskinen in which he outlined his approach to bringing additional people on board despite a budget crunch:

Mr. Koskinen said the IRS found money for the hiring—despite budget constraints—because of retirements, other departures and unspecified “efficiencies.” The first wave of hiring will begin in a few weeks and will be concentrated in the IRS department that monitors small businesses and the self-employed.

“While adding 600 to 700 new enforcement hires will not replace those who have left, it will help fill key gaps in our enforcement workforce created by years of attrition and will provide existing employees promotion and developmental opportunities, including serving as mentors and instructors for the new staff,” Mr. Koskinen wrote.

So, what exactly will all these additional agents be used for? There is much speculation online that many of them will be utilized to crack down on worker misclassification. Attorney Johnathan R. Flora wrote:

"While the Commissioner's announcement of new enforcement positions does not earmark any of them specifically to worker classification, it seems very likely that it will match at least some, if not many, of these positions to that on-going enforcement objective. Even more enforcement positions are called for in the Administration's 2017 budget proposal. The Commissioner claims that each dollar U.S. Treasury spends on enforcement positions "typically returns almost $10 to the U.S. Treasury."

Despite these new hires, the Internal Revenue Service will end the year with fewer employees than when the year began.

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