By: Nancy E. Joerg, Esq.
Recently I wrote an article announcing the alarming and aggressive new IDES audit policy. The article has "gone viral", and I am getting calls from Illinois business owners, accountants, controllers, and others who are very concerned.
As stated in that article, IDES auditors will now "go back" to the prior year when doing an audit if the amount owed in unemployment insurance contributions for the initial audit year is more than $2,000 (excluding the 24% interest rate as imposed by the IDES on contributions assessed).
This is of course truly terrible news for Illinois companies who use independent contractors. Potential liability has shot way up to the stratosphere! The older (much more employer friendly) IDES audit policy was that IDES auditors would only "go back" and audit the prior year if the contributions owed for the initial audit year were over $5,000.
Callers have asked me how this can happen so suddenly----and without any notice. They are understandably angry---and quite worried.
In 1991, Loleta Didrickson was appointed as IDES Director and during her three-year term as Director, a pro-business IDES audit policy was instituted, with no warning and no notice, that IDES auditors would only audit a prior year (in addition to the initial audit year) if the amount of contributions owed for the initial audit year was over $5,000. The change happened overnight and (happily for Illinois business owners under IDES audit) impacted even audits underway at the time. Naturally, companies under IDES audit were thrilled at what was truly viewed by my clients under IDES audit as a kind of merciful and miraculous reprieve!
Now, the reverse has befallen companies under IDES audit.
Callers are now asking me anxious questions such as: "What if the second year under audit is also over $2,000? Will the IDES auditor now go back and audit a third year?" The dreaded answer is: "Yes". And, by Illinois law, the IDES auditor can even cover a fourth year in the same audit.
The rational response is for a company to lower liability by strengthening independent contractor status. As soon as possible, review and update your written independent contractor agreements and website. Do a careful and complete self audit. Set up a checklist and system to file proof of independent contractor status.
For consultations on limiting your liability in the use of independent contractors, contact Attorney Nancy E. Joerg, who enjoys a nationwide reputation in assisting companies who use Independent Contractors of all types. Nancy Joerg can be reached at Wessels Sherman's St. Charles, Illinois office: (630) 377-1554 or email her at firstname.lastname@example.org.