Calculate Your Worker Misclassification Risk

Independent Contractor Risk Assessment is Important

Independent contractor misclassification is an important concept to grasp when engaging contingent workers. While most businesses understand that the threat of reclassification is real and growing, quantifying such risk is still difficult for many enterprises.

This isn’t surprising. IC reclassification penalties are highly variable and may rise and fall at the discretion of the IRS auditors who levy them. To add to the confusion, the IRS isn’t the only entity with a stake in contractor reclassification: the Department of Labor, state tax authorities, and others can get into the act as well. Plus given that each state has its own laws and penalties, a dark cloud of ambiguity surrounds potential liability.

While we can’t cut through all the ambiguities, MBO Partners offers a calculator that quantifies what we can: the IRS component of the risk. Our legal team scoured the IRS code and assembled the possible penalties into a single easy-to-use calculator.

How our Calculator Quantifies Your Risk

Complete the form below to access the MBO Partners IRS Reclassification Liability Estimator.

The calculator asks a few simple questions related to the number of contractors you use, the percentage that may be misclassified, and more.

Your results will be displayed as follows:

• “IRS Liability if Unintentional” – This is the risk if the IRS believes that you have misclassified workers unintentionally. It basically represents the low end of your possible liability.
• “IRS Liability if Intentional” – This is what you could face if the IRS believes you misclassified workers intentionally or if you knew of the transgressions and didn’t do enough to fix them. This represents the high end of your possible liability.

Please note: This calculator is for demonstration and estimation purposes only. While the laws it references are real, the IRS uses its discretion in assessing penalties and it may raise or lower its fines based on your circumstances. As a result, the actual penalties you could face if the IRS reclassifies your contractors as employees will likely be somewhere in between these two results.

Download our calculator to assess your company’s level of risk for misclassification.