Why is this so difficult for employers?

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A recent report from the Treasury Inspector General For Tax Administration (TIGTA), said they found weaknesses in the IRS's procedures for ensuring taxpayer compliance with worker status determinations.
"The misclassification of employees as independent contractors is a nationwide problem affecting millions of employees," J. Russell George, Treasury Inspector General for Tax Administration stated. "Left unchecked, it will continue to grow and contribute to the tax gap. The IRS should do more to ensure that the burden of uncollected taxes is not shifted to compliant taxpayers."
The IRS allows both employers and workers to request determination letters from the agency regarding the worker's tax status as an employee or independent contractor. While this determination is binding, TIGTA reported that employers often fail to withhold taxes even though the IRS has stated that the worker is properly classified as an employee. The IRS created Form 8919 so that employees in these circumstances could report their personal liability for Social Security and Medicare wages. Nevertheless, TIGTA found that employees may be abusing Form 8919 in order to avoid payment of employment taxes and estimated that 74,068 taxpayers avoided $26.2 million in Social Security and Medicare taxes, and the IRS could lose $131 million in Social Security and Medicare taxes over the course of the next five years as a result.
The IRS disagreed with TIGTA's valuation of this amount, pointing out situations where a taxpayer could receive relief when the taxpayer could be ruled an independent contractor by a court and would not have an employment tax liability.
What really intrigues me is why it is so difficult for employers to determine whether someone is an independent contractors or an employee? There are several EDD resources out there and the best one s I’ve found over the years is a simple yes and no questionnaire. Answer too many questions with a “yes” and you know you’ve got an employee on your hands no matter how much you’d wish the person could be classified as an independent contractor.
The form is on the CEA website in the resources tab, or go to: http://www.edd.ca.gov/pdf_pub_ctr/de38.pdf
Established in 1937, CEA is a non-profit association providing personalized and cost effective comprehensive information, services, and training for all aspects of human resources management,California Labor Law and relations solutions throughout California. Located throughout the state, CEA’s staff of regional directors draw upon more than 150 years combined knowledge and experience to assist in all aspects of employer-employee relations.
For more information please contact:
Scott J. Dear, Director of Membership Services
Toll free 1-800-399-5331 or 916-921-1312
Mobile 916-281-5898
Email: sdear@employers.org
Website:http://www.employers.org/
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