The tax lawyers at Nardone Law Group routinely advise and assist taxpayers regarding their ability to utilize voluntary disclosure programs, prior to being audited by the Internal Revenue Service. For more information, see our articles regarding Voluntary Disclosure Programs – Ohio and Other States and the Ohio Use Tax Amnesty and Other Voluntary Disclosure Options. Importantly, one area that Nardone Law Group has noticed causing confusion for businesses involves classifying workers as independent contractors versus employees. Correctly classifying workers as independent contractors or employees is vital in ensuring that a business is properly reporting its withholding tax liability to the Ohio Department of Taxation (the “Department”). Below is a summary of the classification determination and the option to make a voluntary disclosure if your business had incorrectly classified workers.
The determination of whether a worker is an independent contractor versus an employee is not a clear-cut, black-and-white test. Rather, it is based on a number of factors, which focus on the level of employer control over the worker. In Ohio, if a business misclassifies its workers as independent contractors versus employees and is audited, the Department will assess tax, interest, and penalties not only for failure to pay the withholding tax liability, but also for failure to file the required Ohio withholding forms. Further, an employee charged with the responsibility for filing the withholding tax report and making payment will become personally liable for the failure to file the report and tax due. See Ohio Revised Code section 5747.07(G).
Ohio Voluntary Disclosure of Employer Withholding Tax Liabilities Program
Fortunately, the Department offers a voluntary disclosure program for withholding tax liabilities. By making this disclosure, businesses can avoid payment of penalties for failure to file timely and for failure to pay timely. Under the program, the Department requires businesses to pay all of the withholding tax due plus interest for at least the past four tax years, although the Department can technically ask for the past 10 years. This interest can range from 3% to 6% depending on the tax year involved. It is important to note that only businesses that are not currently under audit are eligible for this program. Thus, if you suspect that your business is not in compliance, the time to act is now – before the Department contacts you.
Contact Nardone Law Group
If your business is interested in participating in one of the Ohio Voluntary Disclosure Programs, you should contact the experienced tax attorneys at Nardone Law Group. We have vast experience representing individuals in voluntary disclosure programs with the IRS and the Ohio Department of Taxation. Our experienced tax lawyers will thoroughly review your case to determine what options and alternatives are available. Contact us today for a consultation to discuss your case.