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.

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.

The UPOAA contains a host of provisions governing the drafting and interpretation of powers of attorney. For example, unless otherwise stated, a power of attorney is presumed to be durable (meaning that it remains in effect even if the person granting the power becomes incapacitated) and non-springing (meaning that it goes into effect immediately, rather than upon some later occurrence). While most powers of attorney executed before the adoption of the UPOAA will likely continue to operate as intended, the Act does apply to powers of attorney executed before its enactment. If you have any concern about a power of attorney, please contact an estate planning attorney for guidance.

Perhaps the most important part of the UPOAA is a set of new rules governing the acceptance of powers of attorney by third-parties, such as financial institutions. In a nutshell, the Act seeks to promote the acceptance of powers of attorney by protecting those who rely in good faith on an acknowledged power of attorney (meaning one that purports to have been verified before a notary public or similar officer), while making one who improperly refuses to accept a valid power of attorney liable for attorney fees and costs of obtaining a court order. Certain procedures govern the acceptance of powers of attorney. For instance, the third-party must either accept a power of attorney or request certain additional documentation within seven (7) business days; and, thereafter, the third-party must accept the power of attorney within five (5) business days after receipt of the requested document. These provisions should make the acceptance of powers of attorney by third-parties more consistent – a welcome change.