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Let’s face it, many employers have become creative in their efforts to survive the recession. While many of these creative efforts have proven to benefit both the employer and his employees, there are those that aren’t without risk. One of these tactics is the practice of laying off full time employees and then bringing them back on board as independent contractors. Often, it’s the best solution for both parties. Unfortunately, the IRS might have a different take on these new careers.

A recent announcement has many business owners, including small business owners, concerned over their hiring decisions. The Internal Revenue Service is going to be closely scrutinizing those who opt for independent contractors over full time employees who are eligible for benefits, vacations and medical insurance. The problem is, these newly classified self employed contractors are not in agreement with the IRS. They willingly sacrificed vacation hours for a paycheck. Their option was unemployment, after all. Looks like the IRS is the only one who sees problems and risks.

Not so fast. Turns out the IRS has no interest in complicating a situation that’s working – as long as it’s legal. It’s those few who are illegally claiming unemployment benefits while continuing in their jobs. Since they’re classified as self-employed, the employees are responsible for reporting and paying any taxes. Therein lies the problem. Consider it the classic double-dipping scenario. Laid off employees apply for unemployment benefits but also are negotiating jobs with the employers who just handed them their pink slips. They’re receiving payment as usual, but it’s not being reported, at least until the company does its year end taxes.

It doesn’t stop there, though. Several recent lawsuits have lawyers busy in courtrooms across the country. Cable installers for satellite companies, upon discovering their independent contractor status, are suing what they thought were their employers for overtime and other benefits they’ve been denied only to discover they were never considered to be employees. And experts like A. Harrison Barnes say these most recent lawsuits are only the tip of the iceberg. His site has seen an increase in law firms looking for legal candidates who handle these kinds of cases. Many are even hiring legal students to assist with research efforts.

One suggestion A. Harrison Barnes makes to anyone considering the independent contractor structure is to consult an employment lawyer for specifics on both a federal and state level. It’s always wiser to be proactive rather than reactive. The details of the relationship, including the length of the employment, should be outlined in clear terms for both the employer and contract. Most certainly there should be clear provisions regarding overtime and other compensation that most self employed are not entitled to. In the meantime, those career resources such as will continue to see a continued trend in the need for qualified legal lawyers as this new practice continues to unfold. Ultimately, we all want to see an end to the recession and a return to some degree of normalcy. Until then, it’s a cautious leap of faith both businesses and the self employed.

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