By Craig Lyons
May 23, 2019, 3:00 PM
Indiana lawmakers plan to probe lost revenue when employees are listed as contractors or part-time by employers to avoid additional taxes.
A legislative study committee will look at worker misclassification and how to deal with potential lost revenue to the state. A study done by the Building Trades and Construction Council estimates the loss to the state from misclassification at $400 million, but a state-authored report posited the figure is closer to $14 million to $20 million for the state and $5 million to $7 million in local income tax revenue.
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The state says worker misclassification happens when employees are listed as independent contractors or part-time employees, which often leaves them without overtime pay, workers’ compensation and unemployment insurance.
“This is little more than payroll tax fraud committed by unscrupulous contractors who are trying to gain an unfair competitive advantage in the marketplace,” Beck said. “Payroll fraud affects every taxpayer, shrinking public budgets, and even health care costs. It is about regaining lost tax revenue and insurance fund premiums because of dishonest contractors.”
Two reports have studied worker classification, one by the Indiana Building Trades and Construction Council, and a second from the Indiana Department of Revenue and Workforce Development and the Workers’ Compensation Board.
“There are at least four state agencies in state government – the Indiana Department of Revenue, the Indiana Department of Labor, the Worker’s Compensation Board of Indiana, and the Department of Workforce Development – that have the ability to investigate and report on this subject matter,” Beck said. “What this study would do is direct these agencies to tell us how pervasive worker misclassification is in Indiana, and what we can do to combat it.”