Consequences For Misclassification Of Contractors Highlighted

Several recent news items highlight the importance of properly classifying workers for tax purposes as either independent contractors or employees. This is a complex issue that confronts many businesses across a wide array of industries.

Blackwater Security Consulting has come under Congressional scrutiny recently due to its classification of security guards as independent contractors rather than employees. Rep. Henry A. Waxman D-Cali., Chairman of the House Committee on Oversight and Government Reform, sent a letter late last month to Blackwater owner Erik Prince in which he referenced possible tax evasion regarding Blackwater's federal tax classification of its security guards stationed in Iraq as independent contractors rather than employees. The letter noted the fact that earlier this year the IRS ruled that Blackwater should have classified a security guard as an employee rather than an independent contractor, after the security guard had protested his classification as an