The Critz campaign has come out swinging in yet another chapter of the contentious race for PA-12. Following a jab by Rothfus last week on a House tax vote, Rep. Mark Critz (D-Cambria) is now up in arms over how his opponent pays employees.

Rothfus’ Campaign Manager Jon Raso told The Tribune-Democrat that all staff members are hired as consultants, meaning they (and not the campaign) are responsible for covering both their own as well as the employer’s share of taxes. This includes Social Security and Medicare.

Critz’s campaign hires both employees and consultants, having covered $40,000 in taxes for their employees during the first half of 2012. Rothfus has not had to pay any taxes because he has no “employees.”

The Tribune-Democrat’s Dave Sutor has the report:

Under common-law guidelines, as provided by the IRS, an individual must be treated as an employee if the candidate can “control or have the right to control what the worker does and how the worker does his or her job.” Rules also exist, similar to all businesses, pertaining to the use of personal facilities and tools, how payment is issued, training, permanency of the relationship, contract language and degree of integration into the operation.

The Critz campaign feels Rothfus is not following proper IRS procedure.

“It’s astonishing to me that someone running for office would circumvent laws when running for office,” said Mike Mikus, Critz’s campaign manager.

Mikus is operating as a consultant with his company, EIS Solutions, which has received more than $17,000 in fees from the Mark Critz for Congress Committee in 2012. Mikus works from home, handles other clients and is not told when and where to perform his job.

“By any definition, I am a consultant,” he said.

It is more understandable for campaign managers to be labeled as consultants than it is for individuals involved in the day-to-day operations of running an office or holding a political event.

…

“It’s very usual,” said Raso, who, as a consultant, received direct payment of $14,500 from Rothfus for Congress during the first half of this year. “It’s a very commonly used practice in seasonal campaigning.”

Regionally, though, Rothfus is an exception among House candidates by using the all-consultant approach.

Counting the 12th and the four districts abutting it – the 9th, 3rd, 14th and 18th – there are a combined total of 10 Republicans and Democrats seeking seats in the November election.

Seven have listed payroll taxes, salary and/or workers’ compensation contributions on their 2012 FEC reports, albeit small amounts in some cases. Two are running campaigns with limited budgets and no paid workers, having raised less than $20,000 apiece through the first two quarters.

While Mikus said he considers the practice to be unlawful, Rothfus’ approach is not unheard of in politics. It places more of a burden on workers when they are hired as consultants, but, ultimately, it is not necessarily illegal. Taxes are still being paid, but “consultants” ending up footing a larger bill because their employer is not paying a portion of them.

When it comes to classifying workers, the IRS is fairly clear about the distinction, although there appears to be some wiggle room.

The difference between employees and contractors is that employees are controlled by the employers not only when it comes to the final product, but also what they do, how they do it and when they work (their schedule).

According to the IRS, “the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”

Furthermore, Illinois State University’s IRS Factor 20 Test to determine whether an employee or a contractor makes a couple of interesting points.

If workers receive company-provided training, have dictated hours and are required to work on-site (particularly if the work can be done elsewhere) this may indicate an employment, rather than a consultant, relationship.

However, the study also said that no single factor is determinant of an employment relationship.

The Critz camp maintains that the way Rothfus classifies his employees is illegal, as not all of the workers can possibly have as much freedom as the true “consultant” workers do.

Update: Allegheny County Democratic Committee Chair Nancy Mills has filed complaint against Rothfus accusing him of dodging taxes. Wednesday, Mills alerted both the Internal Revenue Service and the Pennsylvania Department of Revenue about Rothfus’ practice of terming campaign workers “independent contractors.”

In her complaint to the IRS, Mills explained just why misclassifying employees is illegal.

“As you know, misclassifying workers as independent contractors improperly allows an employer like Rothfus to avoid paying payroll taxes which denies the government revenues and places an undue burden on employees because they are forced to pay higher taxes.”

Mills also noted that it is “vital” that politicians pay taxes just as every other business does.

“It is clear to anyone with any common sense that Keith Rothfus is purposefully and illegally misclassifying his workers so he doesn’t have to pay any taxes.”

Rothfus’ Campaign Manager Jon Raso maintains that the campaign is doing nothing wrong.

“There is nothing illegal about this campaign, there has been no issue with any agency, no taxes have been avoided, no taxes are past due and all federal, state and local taxes will be paid in full.  Not surprisingly, Congressman Critz has revealed he doesn’t know the first thing about small businesses. More and more of the workers of southwestern Pennsylvania are finding seasonal work as contractors because they can’t find work in the Obama/Critz economy.”

He also said that Critz is attacking his opponent to distract from the Congressman’s own record of “blindly” voting to cut Medicare and supporting the President’s economic policies that have led to 43 months of unemployment over 8 percent.

“This is politics as usual from a career politician, and proves Congressman Critz doesn’t care about your job, he only cares about his own.”