Wisconsin lose millions due to employer payroll fraud

MENASHA, Wis. (WFRV) – Payroll fraud and worker misclassification has plagued Wisconsin for years but it’s also costing our state big bucks, which prompted Governor Evers to form a task force.

Recently that task force released a report with some shocking findings.

Wisconsin is losing millions –according to a report released by the Department of Workforce Development (DWD) Fraud and Worker Misclassification Task Force, mainly because of illegal business practices such as payroll fraud and misclassifying workers, particularly in certain trades.

Andy Buck, a DWD Task Force member says, “Mainly in the construction industry but it’s not only exclusive to the construction industry, farming is a big one and surprisingly nail salons.”

Payroll fraud is when companies don’t pay or significantly underpay taxes and insurance to the state.

Attorney Matthew Lein, has written several articles about payroll fraud and worker misclassification. He has also represented workers involved in these cases and says, “The reason employers do it is that it’s very tempting because they can hopefully avoid paying payroll taxes, workers comp, other forms of insurance.”

Businesses that misclassify employees as independent contractors illegally under-bid and push away upstanding companies.

Lein also notes, “The two tell-tell signs for most employees that they’re not independent contractors is if they have a federal employer identification number or how they’re paid. Most employees don’t work on a bid. They’ll work per hour. I see this in Uber and Lyft as well.”

Buck recounts, “One worker in Winnebago county told me last year. I asked him if he was working for a specific paint contrator and he said ‘well why would I work for a paint contractor and be employed. If i did that i’d have to pay child support.'”

The task force reports payroll fraud and worker misclassification has cost the state big money:

$91.2 million in personal income tax losses
$56 million in unemployment insurance tax losses
$51.2 million in business tax losses
$2.6 million in benefits paid to uninsured workers

With the state’s budget tightened due to COVID-19 collecting the hundreds of millions owed because of tax evasion– is more important now than ever.

Buck says, “During a worldwide pandemic when so many thousands of workers are having a hard time with unemployment if they had that $56 million in unemployment, I’d think they’d be able to do their job a little bit better and help the most vulnerable Wisconsin.

Employers who misclassify workers face a maximum penalty of up $25,000 each occurrence.

The task force has offered several recommendations to fight this tax fraud –which include hiring more field auditors and stiffer penalties.

Additional articles on payroll fraud and worker misclassification:

1. Debt Collectors mislead consumers
2. False affidavit filed in court against consumer – Process server lied to the court to get judgment
3. Robocalls and HSN required to pay $700,000