TAX NEWS - January 2010

Florida Tax: Employers Urged to Verify Worker Classification for Unemployment Tax

Employers should understand how to determine whether a worker is an employee or an independent contractor, so they can correctly include all employees on their Employer's Quarterly Report (Form UCT-6). The main distinctions are:

An employee is subject to the will and control of the employer. The employer decides what work the employee will do and how the employee will do it. An officer of a corporation who performs services for the corporation is an employee, regardless of whether the officer receives a salary or other compensation.

An independent contractor is not subject to the will and control of the employer. The employer can decide what results are expected from the independent contractor, but cannot control the methods used to accomplish those results.

How the worker is treated, not a written contract or issuance of a 1099, determines whether the worker is an employee or an independent contractor. The Internal Revenue Service (IRS) has additional information that can help you decide.

Misclassification of workers is not just a tax reporting issue; it also affects claims. If a person files a claim for unemployment compensation and the employer has not been including the person on the quarterly report, this can cause a delay in benefit payments.


How to Correct Reporting Errors

If the employer filed employment reports but left out certain workers, he or she must send a Correction to Employer's Quarterly or Annual Domestic Report (Form UCT-8A) and pay the additional tax and interest due. The Department can require the employer to file amended returns as far back as 5 years.

If the employer did not file any employment reports, he or she must submit UCT-6 forms and pay tax and interest going back to the date of employment of the worker(s). The Department can require the employer to file returns as far back as 5 years.