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The owner of a construction company was found liable for employment taxes for workers who were determined to be employees, rather than independent contractors.

Ruling Says Workers Were Employees; Construction Company Owner Liable for Employment Taxes

  • 3/6/2013

Ruling Says Construction Workers Were Employees, Not Contractors

The Tax Court has ruled that the owner of a construction company is liable for employment taxes for workers that were determined to be employees, rather than independent contractors. None of the workers worked full-time for the owner, and there was evidence that the owner and one of the workers believed that they had created an independent contractor relationship.

However, these factors were outweighed based on the evidence:

  • The owner exercised control over the workers in completing the work that they had been hired to do.
  • The owner provided the workers with all the heavy tools needed for their work.
  • The workers received a negotiated fee from the owner regardless of whether or not the project they were working on realized a profit or suffered a loss.
  • The owner had the right to discharge the workers at will.
  • The workers were an essential part of the owner’s construction operation.

Section 530 relief from employment tax liability was not available because the owner failed to provide Forms 1099 for the workers, which confirmed that he had not consistently treated the workers as not being employees on all tax returns for the tax periods at issue.

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