- Is there an actual contract between you and the contractor?
- Are your payments to them regular in nature?
- How much control do you have over them with regards to work hours, uniform, training, etc.?
- Do they offer the same services to other companies through their own business?
- Are you providing them all the tools, training and supplies they need?
- Essentially how loose is the relationship.
In this episode of “Bella In Your Business”, Bella talks with Katrina Kadyszewski, a former state auditor with the State of Connecticut.
Katrina has over 16 years experience working in a variety of financial positions. She started in the brokerage industry with a Series 7, 63 and 65 and life and health license, and then transitioned to audit work for the CT Department of Revenue Services before leaving to support small businesses in their efforts to get organized for expansion.
Katrina spent 3 of her almost 8 years with the CT Dept. of Revenue Services in the Business & Employment Tax Audit Unit, focused primarily on payroll tax issues. The last 5 years she worked as a Corporation Tax auditor, traveling across the US auditing largely Fortune 500 companies.
Bella and Katrina first discuss a big controversy in the pet sitting industry which is misclassification of employees as either independent contractors or employees. Katrina outlines some key indicators that auditors look for in making that determination:
- Is there an actual contract between you and the contractor?
- Are your payments to them regular in nature?
- How much control do you have over them with regards to work hours, uniform, training, etc.?
- Do they offer the same services to other companies through their own business?
- Are you providing them all the tools, training and supplies they need?
- Basically, consider how loose is the relationship?
Transcript:
This is episode 20 of Bella in Your Business.
Welcome to Bella in Your Business, where Bella will discuss anything and everything about your pet sitting business to help you land on target. So get ready—Bella’s got your chute. Let’s jump.
Welcome to Bella in Your Business. My name is Bella Vasta from Jump Consulting, and today I have a real special treat for all you listeners. Today I have Katrina Kotechewski, who has over 16 years of experience working in a variety of financial positions. She started in the brokerage industry with a series seven, 63, and 65 health license and then transitioned to audit work for the Connecticut Department of Revenue Services before leaving to support small businesses in their efforts to get organized for expansion.
Katrina spent three of her almost eight years with the Connecticut Department of Revenue in the Business and Employment Tax Audit Unit, which is why she’s here today. She focused primarily on payroll tax issues. The last five years, she worked as a corporation tax auditor, traveling across the U.S., auditing largely Fortune 500 companies.
Katrina: I’m excited to be here.
Bella: I think I mentioned to you—no one ever wants to talk to an auditor or a government worker at that, right? They’re probably too shy or too afraid they’re going to say the wrong thing. But today we’re going to blow the lid off of it. As you know, I gave you a little background. In the pet industry, there’s a big controversy going on—it’s been many years in the making—about misclassification of workers as independent contractors or employees.
I’ve been very vocal and take the stance of employees. I’ve even interviewed other pet sitters who have been audited. In fact, if you look back at episode seven of Bella in Your Business, you’ll hear about one Texas worker who was audited and switched to employees because the Texas labor force told her that since her workers didn’t provide dog bowls, she was supplying materials and therefore had employees. It was just crazy.
I know you listened to that one as well to prepare for this, but I’m excited to get your take. I want everyone to know too that we met through good old-fashioned networking, which I always encourage people to do—talk to people, figure out their story, and you never know what you can learn.
So, welcome again. Tell me more about yourself. Tell me the down-low of who Katrina really is, because I told the whole accolades—now give us insight into who you are and about your auditing years.
Katrina: Like you mentioned, I initially started out in brokerage. It was just something that I fell into following an internship that I had in college, but it really wasn’t a great fit, in my opinion, to have a 21-year-old step into the workforce and start telling 65-year-olds where to put their nest eggs. I just felt like they should have a lot more market experience than I did. So I stuck it out and gave it a shot, but ultimately it wasn’t a great fit for me.
Then I switched from one of the fastest-paced industries to one of the slowest—government work. Everyone has their preconceived notions about people who work for the government, and I don’t want to say that they’re all untrue, but there are some of us who work very hard to do the right thing as public servants.
I joined the Connecticut Department of Revenue Services. They had received funding to initiate this Business and Employment Tax Audit Group, which previously hadn’t existed. About ten of us were hired on at the same time to address payroll tax and other employment tax issues. It was exciting to be part of something new.
That was one thing that struck me most when I listened to the podcast about the woman in Texas and her experience—it sounded like an unfortunate situation with people who maybe took advantage or felt a sense of power. It definitely wasn’t one that I had. We were focused on educating taxpayers and working with them to get up to speed.
Bella: You had said “unreasonable person,” and I think that’s where small business owners’ fears come from. We’ve heard so many stories of being subject to one auditor’s interpretation. Some have even said they were told to do things one way, then later got penalized for following those instructions.
Katrina: That’s true. At the end of the day, it’s management style. We were out there to educate taxpayers and help them report correctly, not to threaten or make them fearful. My experience was in Connecticut—I can’t speak for all states—but in general, most auditors want to teach proper methods.
Governments don’t have a lot of resources. Training can lag behind. Regulations change. And none of us were lawyers; we had to interpret complex statutes ourselves, sometimes skewed toward revenue collection. There’s definitely gray area, and it depends on each situation.
Bella: It’s uncanny how auditors don’t understand the pet sitting industry. Using that example of the dog bowl—it’s absurd to think a sitter should carry their own bowl to every house.
Katrina: Exactly. Misclassification comes down to how much control the business has over the worker. The dog bowl doesn’t matter. The auditor’s responsibility is to understand the industry—talk to the owner, research, review legal cases.
Bella: Okay, say I’m a small business being audited. What documents should I have ready?
Katrina: We’d send a letter listing what we’d need. If you’re a sole proprietor, your personal tax return. If not, your corporate or partnership return. Payroll reports, W-4s, bank statements, and any contracts. We looked for underreported wages—like when business owners pay personal expenses through the company. And we’d look at misclassification—who you’re paying and for what.
Bella: You mentioned contracts—what do you look for there?
Katrina: Whether they actually exist and state the terms. Are you providing training, uniforms, tools? Are you setting hours or doing reviews? A true contractor should have their own business and multiple clients. If they only work for you, that’s an employee.
Bella: Exactly. And if they’re registered with the state, that’s a good sign.
Katrina: Yes, otherwise it’s a flag.
Bella: You also mentioned states benefit financially from reclassifications.
Katrina: Correct. Even though independent contractors should still report income, the state misses out on withholding taxes, unemployment contributions, and workers comp premiums. It’s about collecting unpaid taxes.
Bella: So, if I get audited, should I go alone or send my CPA or lawyer?
Katrina: Depends on your confidence. If bookkeeping and payroll aren’t your strengths, definitely get representation. But also stay involved. It helps manage the relationship.
Bella: I’ve heard people say, “My CPA said it’s fine to have contractors.” But they’re working regular hours, walking the same dogs weekly.
Katrina: That’s risky. Always ask why your CPA said that and get documentation. Consult multiple professionals—including employment lawyers—and get official rulings when possible.
Bella: But people fear contacting the state, thinking it triggers an audit.
Katrina: I get it, but wouldn’t you rather know ahead of time? Audits typically cover three years, but can go back further in cases of fraud.
Bella: How are audits selected?
Katrina: Through data sharing between the IRS, Department of Labor, and state. Sometimes random, sometimes targeted by industry. If one audit uncovers trends—like in pet sitting or boat brokerage—we look at similar businesses.
Bella: How far back can they go?
Katrina: Typically three years, but it can go further if needed. And if you switch from contractors to employees, they might check back later to confirm compliance.
Bella: I’ve also heard of the IRS Voluntary Reclassification Settlement Program.
Katrina: Yes, similar to amnesty programs. We had those too—reducing penalties and interest to encourage voluntary compliance. It saves resources.
Bella: That’s smart. For honest business owners, that could be peace of mind.
Katrina: Exactly. It’s overwhelming, but remember, not everything is black and white. Negotiation is possible. If you’re found in the wrong, there are payment plans, and the government’s goal is to collect revenue efficiently. Show good faith—it helps.
Bella: I think people are afraid of Pandora’s box.
Katrina: Totally understandable. But yes, I was specifically hired to find payroll tax issues. Every year, more focus goes into worker misclassification—it’s a big revenue area.
Bella: You’ve been amazing, Katrina. Everyone listening appreciates your insight. You’re that safe place we can go to.
Katrina: I’d love to come back and help answer follow-up questions anytime.
Bella: Thank you so much, Katrina. Please comment, share, or send questions. Thanks for listening.
Thanks for jumping with Bella in Your Business. For more information, free articles, and coaching, go to jumpconsulting.net—and remember, Bella’s got your chute.
Read the full guide: how to switch your pet sitters from ICs to employees.