Calculate Your Worker Misclassification Risk (Guide)

Independent Contractor Risk Assessment Is Important

Independent contractor misclassification is a critical issue when engaging contingent workers. While many businesses recognize the increasing threat of reclassification, quantifying that risk remains challenging for most.

This isn’t surprising. IC reclassification penalties are highly variable and can fluctuate based on the discretion of the IRS auditors. 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 may also be involved. Meanwhile, each state has its own laws and penalties.

While we can’t eliminate all the ambiguities, MBO Partners offers a calculator that quantifies what we can: the IRS component of the risk. Our legal team thoroughly reviewed the IRS code and compiled the potential 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 other key details of your workforce management program.

Your results will be displayed as follows:

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

Please note: This calculator is for demonstration and estimation purposes only. While the referenced laws are accurate, the IRS uses its discretion when assessing penalties and may adjust its fines based on your specific situation. As a result, the actual penalties you may face if your contractors are reclassified as employees could differ from these estimates.