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Texas lawmakers organizing efforts to combat payroll fraud

There is currently a growing call among business owners, politicians and government officials here in the Lone Star State to crack down on a so-called white collar crime. However, the white collar crime in question does not involve wire fraud, bank fraud, or some other intricate financial scheme, and does not take place in the corporate world.

In fact, it purportedly takes place in a world where hardhats, pickup trucks and building materials are the norm.

The "crime" in question is none other payroll fraud -- or misclassification -- and it is apparently rampant in the state's construction industry. Here, construction companies are accused of purposely misclassify their employees as independent contractors in order to avoid paying taxes, a practice that experts say costs the state a vast sum of money.

A recent report by the worker advocacy group Workers' Defense Project found that two out of every five construction workers in the Dallas area alone are misclassified by their employers.

"We estimate that there's about 300,000 construction workers out there, in Texas, that are being paid off the books," said an analyst with the WPD. "And that's a lot of tax money that Texas is losing out on."

In addition to costing the state millions of dollars in tax revenue, experts say that this payroll fraud drives otherwise honest companies out of business, as they can't afford to match the bids made by their counterparts.

It should be noted those caught misclassifying employees in Texas are currently only required to pay the applicable back taxes and interest, but face no actual criminal charges or penalties for their actions.

However, the Texas Workforce Commission -- the state agency charged with administering payroll tax programs -- has recently called on the state legislature to consider enacting legislation that would impose far more stringent penalties -- including possible criminal charges -- on those businesses that intentionally misclassify employees on construction projects funded with state money.

This call to action seems to be gaining momentum as several prominent politicians are now calling on business owners throughout the state to share their stories about how misclassification has harmed their operations.

It should be interesting to see what transpires ...

If you have been charged or are currently under investigation for any other white collar crime, be certain to contact an experienced legal professional.

This post was provided for informational purposes only and is not to be construed as legal advice.

Sources:

WFAA, "Texas lawmakers urged to crack down on construction fraud," David Schechter, Jan. 28, 2013

Construction Citizen, "Looming Texas payroll fraud crackdown gets national attention," Jan. 21, 2013

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