What is a Washington State Payroll Audit for Arts Organizations?

Washington State is currently implementing payroll audits of arts organizations.

What is a state payroll audit? What is the state looking for?

TPS recently prepared for its own payroll audit, during which we learned a great deal. We would like to share this information with you, especially if you hire independent contractors.

The state is looking for discrepancies in the classification of independent contracts and employees. Our state considers someone an employee when the hiring organization:

  • Directs the person in their work – what to do when they’re there
  • Determines the person’s schedule – when to arrive, when to leave
  • The position cannot be ‘subcontracted’ – fulfilled by another person in the worker’s stead

If you pay someone as an independent contractor but the state considers them an employee, the consequences are significant.

  • Your organization could be penalized with back taxes
  • other consequences

We recommend framing your contracts in a specific way to avoid potential penalties that could occur from these audits. Are you interested in learning more? Use this Independent Contractor Checklist to see what your organization might be missing.

 

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