I wrote an article last year about 10 Common Mistakes Businesses with Independent Contractors Make. Within 20 minutes of sending out the article, a good and helpful contact at Washington State Department of Labor & Industries responded that he would have added another top mistake – failing to take advantage of their appeal rights.
The observation is exactly right! If you’ve been through an audit by Department of Labor & Industries (L&I), Employment Security Department (ESD), Internal Revenue Service (IRS), and other federal and state agencies, you know that the process is fact- and document-intensive with lots of room for auditors to make mistakes. Layered on top of the factual determinations auditors make are legal conclusions they must draw. As is to be expected, while many auditors take pride in their work, and try to get things right, mistakes are made…inevitably, perhaps. That is, auditors sometimes make incorrect assumptions about your business and independent contractors, they sometimes draw incorrect legal conclusions, and sometimes they ignore or may simply be unaware of applicable law. These mistakes are rarely harmless errors, and can result in your business receiving tax assessments that are thousands or tens of thousands of dollars higher than they should be. Just this past week our firm was able to reduce an assessment from approximately $68,000, which would have shut down our client’s business, to $15,000. Had our client not pursued his appeal rights, he would have been stuck with a debt that was $55K more than it needed to be. See some of the other results our firm has been able to obtain for clients here and here.
So if you have been through an LNI audit, an ESD audit, an IRS audit, and have received a tax assessment, don’t assume that the auditor got it right. Get a second opinion from an experienced audit/independent contractor attorney to determine if an appeal is warranted. As the L&I official noted, it is often a big mistake not to pursue your appeal rights.
And if you do decide to appeal, do not be late in submitting the appeal. Seriously, don’t be late. Read this.
