Calculate Your Worker Misclassification Risk

By MBO Partners | September 10, 2022

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Key Points

Threat of reclassification is real and growing concern for businesses.

MBO Partners developed a calculator that quantifies what we can: the IRS component of the risk.

Download our calculator to assess your company's level of risk for misclassification.

Why a Risk Assessment is Important

Discussion of independent contractor misclassification seems to be everywhere nowadays. And while most now acknowledge that threat of reclassification is real and growing, most businesses don’t know how to quantify this risk.

This isn’t surprising. IC reclassification penalties are highly variable and may rise and fall at the discretion of the IRS auditors who levy them. To add to the confusion, the IRS isn’t the only entity with a stake in contractor reclassification: the Department of Labor, state tax authorities, and others can get into the act as well.

And given that each state has its own laws and penalties, a dark cloud of ambiguity surrounds the potential liability.

While we can’t cut through all the ambiguity, MBO Partners developed a calculator that quantifies what we can: the IRS component of the risk. Our legal team scoured the IRS code and assembled the possible penalties into a single easy-to-use calculator.

How our Calculator Quantifies Your Risk

Complete the form below to access the MBO Partners IRS Reclassification Liability Estimator.

The calculator asks a few simple questions related to the number of contractors you use, the percentage that may be misclassified, and more.

Your results will be displayed as follows:

  • “IRS Liability if Intentional” – This is the risk if the IRS believes that you have misclassified workers unintentionally. It basically represents the low end of your possible liability.
  • “IRS Liability if Unintentional” – This is what you could be faced with if the IRS believes you misclassified workers intentionally or if you knew of the transgressions and didn’t do enough to fix them. This represents the high end of your possible liability.

Please note: This calculator is for demonstration and estimation purposes only. While the laws it references are real, the IRS uses its discretion in assessing penalties and it may raise or lower its fines based on your circumstances. As a result, the actual penalties you could face if the IRS reclassifies your contractors as employees will likely be somewhere in between these two results.

Download our calculator to assess your company’s level of risk for misclassification.

 

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