Like most taxpayers, construction workers were impacted by changes made under the Tax Cuts and Jobs Act (TCJA). A failure to account for these changes could lead to unexpected tax bills, penalties, and tax debt that continues to accumulate.
Worker Classification Issues
One of the biggest tax issues for construction workers is worker classification. This comes down to one question—are you an employee or an independent contractor?
The TCJA changed many laws that affect each of these groups. If you aren’t aware of these changes, you may not understand which employment arrangement is better for you overall.
For example, employees can no longer receive a deduction for unreimbursed employee expenses. This deduction, along with all other miscellaneous itemized deductions, was eliminated under the TCJA.
Independent contractors can still deduct their ordinary business expenses. Construction workers may have many potential business expenses, such as:
- Vehicles expenses
- Supplies, materials, and tools
- Machinery
- Business licensing fees
- Protective work clothing
- Business-related travel and 50% of meal costs
The qualified business income deduction may also benefit construction workers that are organized as pass-through entities, such as sole proprietorships, partnerships, or limited liability companies. Construction workers who operate as independent contractors should use a qualified tax preparer to risk their IRS audit risk and make sure they are claiming all of their deductions properly.
However, it’s also important to know how worker classification issues are determined. You (or your employer) can’t just decide that a worker will be called a contractor. You need to be treated like a contractor, which limits the amount of control your employer can exert over you.
Construction Worker Tax Debt
If you have a large amount of tax debt from construction work, you should talk to a tax attorney to determine if you may have a worker misclassification case. This occurs when an employer treats you as an employee, but classifies you as an independent contractor to avoid paying payroll taxes, unemployment taxes, and worker’s compensation insurance and benefits.
Your employer may be responsible for some of your tax liability if you have a worker misclassification claim. You can negotiate an installment agreement to pay off any remaining tax debt with monthly payments that fit your budget.
Get help with IRS tax problems by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.