Tax
Court Decision Yields Important Victory for Medical Transcription
Industry in Battle to Define Independent Contractors
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After a lengthy and expensive legal battle, an IRS tax case
was recently settled in favor of a medical transcription service
organization (MTSO). In a rare defeat, the IRS conceded that
the MTSO was in the right.
The IRS had demanded an amount exceeding $500,000 in overdue
taxes and penalties for what it characterized as improper
reporting and payment of payroll taxes. At the center of the
legal controversy was the MTSOs treatment of its medical
transcriptionists as independent contractors instead of employees.
The IRS argued that the medical transcriptionists providing
services to the MTSO should have properly been designated
as employees and that the company should have been withholding
and submitting payroll taxes to the US Treasury on behalf
of these employees on a quarterly basis. Mr. Brager, on behalf
of his client, argued that the transcriptionists in fact met
the IRS definition of independent contractor and that no taxes
were due.
At the conclusion of a multi-year legal battle the tax courts
ruled in favor of Mr. Brager and his medical transcription
service client and the IRS conceded that the evidence
supported the claims of the MTSO. The courts also ordered
the IRS to pay attorney fees to the MTSO in light of the unreasonable
legal burdens which had been placed upon the MTSO in defending
its position.
The case represents a significant victory for MTSOs
and other small businesses who make an honest concerted effort
to comply with published standards as they distinguish between
employees and contract workers. For more information on IRS
employee vs independent contractor standards consult the IRS
website.
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