IRS FINES FEDEX $319M FOR "INDEPENDENT CONTRACTOR" DODGE

(PAI)
Press Associates, Inc. (PAI) -- 1/4/2008

IRS FINES FEDEX $319M FOR ‘INDEPENDENT CONTRACTOR’ DODGE

    WASHINGTON (PAI)--Employers’ continued efforts to misclassify workers as “independent contractors” and avoid paying Social Security taxes, Medicare, workers’ comp and other benefits just got a $319 million kick in the head.

    That’s how much the Internal Revenue Service fined FedEx in late December for misclassifying 15,000 of its FedEx Ground pickup and delivery drivers as “independent contractors,” the Teamsters reported.

    Not only that, but the problem is so pervasive, the IRS had to create a new form for misclassified workers to fill out to cover Social Security and Medicare taxes their employers should have paid.

    The union, which is trying to organize FedEx, gleefully reported the fine.  The company said it would appeal the ruling.

    Besides the FedEx workers, other “independent contractors” who really aren’t independent abound in the construction industry and among some service industries, such as advertising sales and messengers.

    Teamsters President Jim Hoffa hailed the IRS ruling against “FedEx's illegal independent contractor scam."  Just the day before the IRS ruling, the Massachusetts attorney general also ruled that FedEx Ground illegally misclassified its drivers.  "It's game over” for FedEx, Hoffa added.

    The IRS found the problem of misclassified “independent contractors” is so large that it created new Form 8919 for workers misclassified by their companies.  The form,  “Uncollected Social Security and Medicare Tax on Wages, will now be used to figure and report the employee’s share of uncollected Social Security and Medicare taxes due on their compensation,” the agency explained on Dec. 20--the day of its FedEx ruling.  IRS did not say what it would do about the employer’s share of those levies.

    “Generally, a worker who receives a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employ-ment tax on the net profit,” IRS explained.  “However, sometimes the worker is incorrectly treated as an independent contractor when they are actually an employee.  When this happens, Form 8919 will be used beginning for tax year 2007 by workers who performed services for an employer but the employer did not withhold the worker’s share of social security and Medicare taxes,” the agency added.

    Workers who have to file the form are those--like the FedEx drivers--who receive letters from the IRS saying they’re really employees and not independent contractors.
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