Scenario 1

According to federal law, an employer has to withhold payroll taxes and pay them to the Internal Revenue Service (IRS) when the time comes. Although in this scenario, the school sees it best not to withhold payroll taxes of its independent instructors. Generally, an employer withholds tax on behalf of their employees (Irs.gov, 2021). An employer may fail to withhold payroll taxes due to emergencies, economic problems, or being too busy. In the case where employees are self-employed or independent instructors, it is the responsibility of the employees to pay the withholding taxes. This is good for the school since it will not be held responsible by the IRS in case of tax evasion. On the other hand, some employers find it easier not to maintain workers’ or unemployment compensation insurance coverage. In the case of a compensation claim, the employer or organization might undergo a lot of financial expenses. The cost of employer’s compensation insurance will spike if many workers make claims on it since the case will go through a court process (Congressional Research Service, 2020). In addition, workers might fabricate or exaggerate an injury to receive worker and employment compensation. Therefore, some organizations find it easier not to withhold payroll taxes or maintain workers’ and unemployment compensation insurance coverage.

In my opinion, I see a problem with how the organization is running since it might encounter issues with the law and the IRS. First, although the workers are considered independent contractors, they teach the learners according to the school’s schedule and lesson plan and train them in their classroom and aircraft. In case of tax issues, the IRS might rule out that they are school employees since the instructors comply with the institutional instructions of where, when, and how the work is done (Hamilton & Nilsson, 2020). Hence the school will be subject to criminal and civil sanctions. Failure to pay taxes is a felony punishable by up to five years of imprisonment or paying a massive amount of money or both. On the other hand, employers need to maintain worker and employers compensation insurance. If an employee or worker is injured on the job, they do not have the authority to sue the school for the injuries. Besides, the insurance is more advantageous to the school than to the instructors. Currently, almost all states require businesses and organizations to maintain workers’ insurance once they have hired a certain number of employees. Failure to do that, the organization can be subject to fines. Therefore, it is essentials for the school to maintain workers’ and unemployment compensation insurance and withhold payroll taxes to avoid problems with authority.