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Can I hire employees as independent contractors to save money on taxes in Indiana? What are the requirements?

Based on the information provided in the Indiana Administrative Code, it is important to properly classify workers as either employees or independent contractors. Hiring employees as independent contractors to save money on taxes is not recommended and may result in legal consequences.

Independent Contractor Requirements

To hire an independent contractor in Indiana, the following requirements must be met:

  • The independent contractor must file a statement with the department with supporting documentation of independent contractor status and obtain a certificate of exemption under IC 6-3-7-5.
  • The independent contractor must file annually with the department documentation in support of independent contractor status before being granted a certificate of exemption.
  • The independent contractor must obtain clearance from the department of state revenue before issuance of the certificate.
  • The certificate of exemption required by this section must be on a form prescribed and provided by the department. A certificate issued under this section is valid for one (1) year.
  • The department shall provide the certificate of exemption to the person requesting it not less than seven (7) business days after verifying the accuracy of the supporting documentation.
  • To be given effect, a certificate of exemption must be filed with the worker’s compensation board of Indiana in accordance with IC 22-3-2-14.5(f) and IC 22-3-7-34.5(g).

Consequences of Misclassification

Misclassifying employees as independent contractors can result in legal consequences. A contractor who knowingly or intentionally causes or assists employees, including temporary employees, to file a false statement and supporting documentation of independent contractor status commits a Level 6 felony under IC 6-3-7-5(m).

Conclusion

In conclusion, it is important to properly classify workers as either employees or independent contractors in Indiana. Hiring employees as independent contractors to save money on taxes is not recommended and may result in legal consequences. To hire an independent contractor, the requirements outlined in IC 6-3-7-5 must be met.

Jurisdiction

Indiana