Businesses are increasingly relying on independent contractors to provide needed services. While using independent contractors can provide a business with significant benefits, if a worker is improperly classified as an independent contractor rather than an employee, the business can be exposed to significant liability. The IRS is in the midst of a three-year program to audit businesses, directed in part towards examining the classification of workers as independent contractors. The President’s proposed 2011 budget also sought increased funding for enforcement, including specifically for employee misclassification.
Businesses often prefer to use independent contractors for a variety of reasons, including not being responsible for paying payroll taxes, unemployment insurance, and worker’s compensation insurance. However, if the IRS finds that a worker was wrongly classified as an independent contractor but was actually an employee, the business can face liability for back taxes and penalties. In addition to an IRS audit, a company’s workers (including disgruntled former workers) can contact the IRS about an alleged misclassification.
Consequently, businesses need to take care to properly classify workers and to maintain proper documentation. The IRS looks at a variety of factors in determining whether a worker is an employee. These factors fall into three categories: behavioral control, financial control, and the relationship of the parties. While not dispositive, every business should have a written independent contractor agreement with each independent contractor that it hires. For assistance with determining whether a worker is an employee or independent contractor, businesses should seek counsel. In some circumstances, it may be advisable to obtain a determination from the IRS by filing Form SS-8.
The Virginia General Assembly made amendments (effective July 1, 2010) to the Small Estates Act, which provides streamlined procedures for the handling of smaller estates. Importantly, probate estates valued at $50,000 or less (not including real estate) may be able to be distributed without the appointment of a personal representative (executor) and without going through the formal probate process. The 2010 amendments added the defined term “small asset” – meaning any asset (other than real property) belonging to or presently distributable to the decedent valued at no more than $50,000. A small asset must be delivered by any person holding it to a designated successor upon the presentation of an affidavit meeting certain requirements. For small assets worth $15,000 or less, no affidavit is required, as long as a few conditions are met.
In many cases, the Small Estate Act provides a more efficient mechanism for wrapping up the estate of a deceased person. Note that the technical legal definition of a “probate asset” for purposes of determining the size of an estate under the Act is not the same as a common sense understanding of someone’s estate. For this reason, the Small Estate Act may be applicable in circumstances where the total estate is far more than $50,000 – for example, where most assets are held jointly with right of survivorship or held in a trust. Heirs, beneficiaries, and persons named as executors are well-advised to consider (or seek counsel regarding) whether the Small Estate Act procedures are applicable, because there is great potential for saving time and expense.
In Virginia, on July 1, 2010, the Uniform Power of Attorney Act (UPOAA) went into effect. The UPOAA changes and codifies the rules and requirements governing powers of attorney in Virginia, . . . [including] new rules governing the acceptance of powers of attorney by third-parties, such as financial institutions. . . .
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