I’ve written several posts on the potential pitfalls that may befall a company that mistakenly classifies workers as independent contractors. You can see those posts here and here. A recent bill introduced in Congress would make it even more difficult to classify workers as independent contractors and would require companies to file more information with the IRS when independent contractor status is claimed.
In summary, the Taxpayer Responsibility, Accountability and Consistency Act of 2009 would:
- Increase the penalties applicable for the filing of a tax return with inaccurate information;
- Provide that a company would only have a reasonable basis for classifying the worker as an independent contractor, for purposes of the safe harbor provision, when the company has classified no other worker holding a substantially similar position as an employee since December 1977; acts based on a written determination addressing the employment status of the individual or an individual holding a substantially similar position; or concluded an examination of whether the individual (or an individual holding a substantially similar position) should be treated as an employee.
- Allow individuals the right to petition the Secretary of Treasury for a determination of their independent contractor status.
The Act, if passed, would apply to all payments that occurred beginning one year after passage.