Tidbits from the Law – June 2011

June 2011

The following are items in the law that we thought you might have an interest in:

… The Internal Revenue Service and the U.S. Department of Labor have plans to audit thousands of companies, including small businesses, for possible misclassification of workers as independent contractors instead of employees.  By classifying a worker as an independent contractor instead of an employee, the employer can avoid paying minimum wage, overtime pay and payroll taxes, unemployment taxes and worker’s compensation insurance.  The penalties for misclassification are severe, with IRS fines ranging from $1,000 to $3,000 per misclassified worker.  This increased scrutiny by IRS and the Department of Labor may be as a result of the bad economy where workers try to claim unemployment benefits where they have been treated as independent contractors where no payments have been made into the system for unemployment benefits.

… Did you know that if you co-sign a lease or a loan with one of your children or other relatives, that you may be responsible for the entire unpaid amount of the lease or loan if that child or other relative defaults or refuses to pay?  The landlord (or the banker) does not have to try to get the money from the relative first before coming to you.  If your relative does not pay, the landlord can obtain a judgment against both of you and then garnish your wages or bank account.  Recently, we have had clients who co-signed these types of legal documents and learned the hard way that they should have known this information prior to signing such documents.