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Misclassification Of Iowa Workers

WorkerMisclassification of workers as “independent contractors” rather than “employees,” is a growing problem in Iowa and across the nation. The federal Government Accountability Office reports that the underpayment of Social Security taxes, unemployment and income taxes in 2006, due to worker misclassification, totaled an estimated $2.72 billion, nationally.

Iowa employers must report wages to Iowa Workforce Development’s Unemployment Division and pay unemployment tax on wages paid to employees as required. Iowa employers must generally withhold state and federal income taxes, and withhold and pay Social Security and Medicare taxes. When employers misclassify workers:

  • They avoid paying these taxes.

  • They might avoid workers compensation coverage.

  • They might fail to follow wage, contractor registration, or other employment and labor laws.

  • They underbid honest, law-abiding businesses that pay all taxes owed.

Misclassification of workers threatens Iowa’s economy, its businesses and its most important resource – it's workers.

The Iowa Legislature provided special funding for extra help to protect workers, law-abiding businesses, and taxpayers.

Office WorkerFAQ's
If you do not know if your workers are employees or independent contractors, visit our Frequently Asked Misclassification Questions.

Reporting Misclassification
If you believe that you, or someone you know, are intentionally misclassified to avoid tax payments, workers’ compensation coverage, and other legal obligations, there is an easy way to report it. Click here to report misclassification.

Contact Information:
For questions about misclassification:

  • Call the Iowa Workforce Development Misclassification Unit at (515) 281-3191 or (800) JOB-IOWA (800-562-4692).

  • Send an email to Misclassification@iwd.iowa.gov.

  • Contact the Iowa Department of Revenue.

  • Write to the Misclassification Unit, Iowa Workforce Development, 1000 East Grand Avenue, Des Moines, IA 50319.

Penalties:
Intentional misclassification of workers is illegal. This practice constitutes tax and insurance evasion. Employers could pay significant penalties and fines. Under various Iowa laws, intentional misclassification of workers can result in penalties, ranging from monetary fines and interest for unpaid taxes, to criminal charges. Penalties are determined on the facts of each individual case.

  • Failure to Pay Unemployment Taxes: Iowa Code 96.16, 96.16(2), 96.14(2)

  • Failure to Pay Iowa Income Taxes: Iowa Code 422.16

  • Failure to Provide Worker’s Compensation Coverage: Iowa Code 87.14A, 86.13, 86.13A

  • Failure to Pay Wages Owed: Iowa Code 91A.12

  • Failure to Register as a Contractor: Iowa Code 91C.8

 

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