2014 US Trucking News – New Law on Misclassification of Truckers in New York
Employers who misclassify truck drivers from New York face civil and criminal punishments under a brand new rule that goes into effect on April 10. Classification has implications not only for employee drivers, but also for truck owner-operators, and leased operators.
Previously known as bill S5867, this rule goes beyond standard Internal Revenue Service descriptions of employee and independent contractors. The Internal Revenue Service, also known as the IRS, is the revenue service of the United States Federal Government. This agency is an office of the Department of the Treasury, and is under the direction of the Commissioner of Internal Revenue. The IRS is also accountable for gathering taxes and the explanation and enforcement of the Internal Revenue Code. The IRS issues tax forms which taxpayers are needed to pick from, and use for evaluating and reporting their federal tax responsibilities. The IRS also issues a number of forms for their own domestic operations, such as Forms 3471 and 4228, which are used during the first dispensation of income tax returns.
Aside from the collection of revenue and tracking down of tax cheaters, the IRS issues administrative decrees, such as revenue rulings and private letter rulings. Also, the Service distributes the Internal Revenue Bulletin which consists of the different IRS assertions. The controlling authority of rules and proceeds allows taxpayers to depend on them. A private letter declaration is also great for the taxpayer to whom it is issued, and gives some details of the Service’s position regarding a certain tax issue.
Bill S5867 indicated that self-sufficient contractors can either own or rent their very own trucking tools. Truckers could also decide to work for one carrier, without having to sacrifice their independent status.
This law was signed by Governor Andrew Cuomo on January 10, and was modified on Monday, March 17. This puts the burden on an employer to rightly classify those who move goods in the state of New York.
It also spells out the consequences for misclassification, and includes a whistleblower stipulation to protect those who inform misclassifications by an employer.
The amendment, which OOIDA and the New York State Motor Truck Association supported, applies an 11-point business entity exam to help figure out who is, and who should continue being an independent contractor.
Those who manage their own gear to carry goods in exchange for compensation and accept an IRS Form a 1099 for the work are, by definition, independent contractors.
IRS tax forms are used for taxpayers and tax-exempt organizations to report financial information to the Internal Revenue Service of the United States. These are used to report income, and compute taxes to be paid to the federal government of the United States, and reveal other information as needed by the Internal Revenue Code (IRC). There are over 800 different forms and schedules. The most well-known of these is Form 1040, which is used by individuals.
The Form 1099 series is used to report different types of income, aside from salaries, wages, and tips (for which Form W-2 is instead used). Examples of reportable dealings are the amounts paid to a non-corporate independent contractor for services. In IRS jargon, these payments are nonemployee reimbursements. The ubiquity of the form has also led to the use of the phrase “1099” to refer to the independent contractors themselves. In 2011, the condition has been extended by the Small Business Jobs Act of 2010 to payments made by people who get their payment from rental property.
Each one who pays must finish a Form 1099 for every covered transaction. Four copies are produced – One for the payer, one for the payee, one for the IRS, and, if necessary, one for the State Tax Department. Those who file 250 or more Form 1099 reports should file all of them electronically alongside the IRS. If less than 250 requirements are met, and paper copies are filed, the IRS also asks the payer to hand over a copy of Form 1096, which is a review of information forms that are being submitted to the IRS. The returns need to be filed with the IRS at the end of February right away, following the year for which income items or other earnings are paid. However, copies of the returns need to be given to payees by January. The law also gives different amounts of dollars under which no Form 1099 reporting requirements are forced. For several Form 1099s, for example, no filing is needed for payees who get less than $600 from the payer during the applicable year.
Owner-operators leased to carriers can also take the business entity exam, to see whether or not they are independent contractors, or just employees.
President of the New York State Motor Truck Association, Kendra Hems, says that it is essential to protect those who want to stay as independent contractors.
Hems says in a magazine that they do feel that the law protects self-sufficient contractors, as well as their capacity to operate in New York. She also says that there are 11 points to that exam. These 11 points are what they discussed at the end of their last meeting. They also feel that self-sufficient contractors will be able to meet all of the 11 points.
A study conducted by Cornell University’s School of Industrial and Labor Relations found that almost 40,000 employers misclassified more than 700,000 workers in New York state between 2002 and 2005.
Consequences for employers or contractors that break the law are unreasonable. A first offense carries a civil penalty of up to $2,500 per misclassified employee, and up to 30 days in jail, or up to $25,000 in criminal fines. While a second or successive offense carries a $5,000 penalty with each misclassified employee, up to 60 days in jail, or up to a $50,000 criminal fine.
Graig Zappia, an attorney with Tully Rickney PLLC, says that one big change that the legislation completes is to place the weight on employers, to categorize those who are doing the work.
Zappia says that the big change is shifting it onto the company, the establishment, the employer, to defend whether or not they have an employee, or an independent contractor. The conjecture to get over the starting obstacle is now borne by the employer, as opposed to in the past, where employees need to verify that they are not independent contractors.