Comments on: Warning: Contractors must really be independent!

By: William L. Pope

William L. Pope — Wed, 26 Feb 2020 00:00:18 +0000

Shane and Dave–those occupations on the so-called AB 5 exemption list are still subject to the Borello test: S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341. This test has 11 items to consider when determining if a worker on the exemption list still qualifies as an independent contractor. This test is a bit more flexible than AB 5, but the overriding principle still applies–the worker must truly be independent; just being on the list does not automatically qualify the person as an independent contractor. This is separate from the Fed’s tests, as Dave stated.

By: Dave Berkus

Dave Berkus — Tue, 18 Feb 2020 23:22:43 +0000

Shane,

Unfortunately, there is no connection between the laws “rules” in California and the Federal IRS guidelines. Many times in the past, and now too, these have diverged. Your California exemption does not affect the ten tests the Fed’s apply above.

Dave

By: Shane Paquette

Shane Paquette — Tue, 18 Feb 2020 22:00:17 +0000

In CA our industry was added to the exempt list of AB5. Since it’s legal in CA for our industry to have IC’s, how does this effect the view of the IRS when it comes to federal regulations?

By: Dave Berkus

Dave Berkus — Tue, 18 Feb 2020 17:40:11 +0000

Bob,
The IRS penalties always fall upon the company, not the contractor. Unfair? Sure. But the company made the decision to classify the person as a contractor in the eyes of the IRS, and is easier to reach. Ouch.
– Dave

By: Bob Wallach

Bob Wallach — Tue, 18 Feb 2020 17:29:09 +0000

Are the IRS penalties you mention in this article a risk to the company, to the contractor or both?