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Misclassifying an Employee
What are the costs of misclassifying an employee?
  • Wages retroactively reported, taxes assessed, interest charged from the date due at 1.5% per month or fraction thereof
    • Usual audit period is three years
    • Failure to file without good cause can mean auditing up to seven years
  • Fraud with the intent to avoid payment of taxes-50% of the tax due penalty
    • A second audit reveals the same errors employer was made aware of in first audit
    • Proof of wages paid in cash to avoid paying taxes
  • Additional penalties may apply under certain circumstances. You may review these possibilities on our website page covering payments & penalties.
It is not possible to present all issues to be considered in all situations. For more information than presented here, contact your  local tax auditor.
The 2005 legislature modified the Independent Contractor statutes. The new statutes take effect January 1, 2006.
This page reflects the position of the Employment Department.
If you have any questions about whether you are properly classified as an employee or independent contractor, contact
  • Employment Department Tax Section (503-947-1488) or,
  • contact your local tax auditor
ORS 670.600 applies only to the Oregon Department of Revenue, Employment Department, Construction Contractors Board, and Landscape Contractors Board. These agencies require that the person performing the work must meet all the criteria of that law.
For information about workers' compensation and Oregon labor law, please contact the Workers' Compensation Division and Bureau of Labor and Industries.
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