By: Drew Gardner
Posted: Feb 25, 2019 10:34 PM EST
SOUTH BEND, Ind. — The construction industry across Indiana is facing something many contractors call a growing problem — payroll tax fraud.
Some contractors are believed to be misclassifying workers, which robs them of many of the regular benefits employees receive and robs the state and federal government of hundreds of millions in tax dollars.
As you drive through Michiana it’s easy to see things are pretty good in the construction industry right now. There are new developments around almost every corner, but in recent years contractors like Tim Larson of La Porte-based Larson-Danielson construction noticed something seemed ‘off’ in some of the bids they were seeing.
” When we bid for a job we know how much is labor, how much is material and we found other contractors bidding at prices we couldn’t quite perceive how they were getting there, because we knew how much they were spending on material and we figured they had to be spending a lot less on labor than we were,” said Larson.
That’s because some contractors are believed to be participating in worker misclassification.
Worker misclassification is the practice of labeling workers as independent contractors instead of employees.
The IRS has a 20 point checklist to determine whether a worker is an employee or an independent contractor.