An Iowa man, who battled the Iowa Department of Revenue for three years over taxes he argued collectors never should have demanded he pay, received a $5,000 reimbursement this week from his former employer.

James Robertson, an 83-year-old Navy veteran, had worked as a maintenance employee for the now-closed Smulekoff’s furniture store for nearly 30 years when the state approached him with a bill of more than $10,000 in back taxes it claimed were overdue. Under a largely unknown section of Iowa law, some workers classified as independent contractors are supposed to charge their employers a sales tax based on their earnings, then remit that to the state.

Revenue Department officials declined to comment about the settlement and reimbursement. Sen. Rob Hogg, D-Cedar Rapids, contends the case is an example of how Iowa must be more alert to potential classification violations to ensure people aren’t wrongfully targeted for taxes they don't owe.

Robertson disputed the state's claim from the start, arguing that the furniture store had incorrectly reported his job status. Robertson said he asked the state's Revenue Department to investigate the issue, but it declined. He then asked the U.S. Internal Revenue Service to review his worker classification.

While waiting for results from the IRS, Robertson said he was under constant pressure from debt collectors hired by the state. He agreed to pay $5,000 to the Revenue Department to settle the case, hoping the money would be returned to him if the IRS found in his favor.

Robertson got a letter from the IRS in October that confirmed his position at the furniture store had indeed been misclassified. He then asked the Revenue Department to return his money but it refused, stating he had signed a deal as part of its “offer in compromise” program and thus gave up any claim to the money. 

Robertson this week expressed relief about the settlement. He and his wife live on less than $1,200 in monthly Social Security payments, he said. 

Many in the state contend that misclassification is a widespread problem and that efforts to fix the problem have been lackluster. Misclassification can cheat employees out of minimum wage, overtime pay and benefits such as family medical leave. It also can allow employers to avoid paying Social Security, unemployment and workers’ compensation benefits, costing state government millions of dollars in lost revenues.

 

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