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Cutting Corners

BusinessWest Online (05/22/12) Charlotte Cathro

As businesses seek to cut payroll expenses, many have hired part-time and temporary workers, and it is important for firms to properly classify these workers to avoid hefty penalties. The U.S. Internal Revenue Service uses a three-part test to determine whether workers are independent contractors or employees based on the worker’s behavioral and financial control and the relationship between the worker and the business. Some states have developed their own tests, which may be stricter than the IRS test. Experts say employers should consult an accountant or labor attorney immediately to determine whether workers are appropriately classified and to assess their exposure.