As we have discussed in a recent post, employers have been using non-employees and independent contractors for various genuine reasons. In many cases, they are seeking temporary access to talent only available to them if they agree to classify the worker as an independent contractor. These companies have no intent to wilfully and wrongly misclassify their workers, and should not have anything to fear from the IRS.
In our previous post, we expressed a hope that the IRS and other regulatory bodies would institute a clear and consistent set of worker classification criteria which companies could follow, making it easier to protect themselves from charges of misclassification and the need to adopt expensive damage control measures.
With due apologies for the irresistible but slightly far-fetched title of this post; I bring you the details of the Fair Playing Field Act of 2013 – which plans to amend the Internal Revenue Code and reviews the classification of workers for the purpose of employment taxes, in the following ways:
A bit of background on the intent of this bill is required. In 1978, Congress passed section 530 of the Revenue Act of 1978 as an interim measure to protect taxpayers – particularly small businesses – from hardships caused by the lack of clarity regarding the classification of some workers. The objective of section 530 was to prohibit the Secretary of the Treasury from publishing regulations or revenue rulings on workers’ employment tax status pending the expected near-term enactment of clarifying legislation. Over the past 33 years, these temporary prohibitions became permanent as the clarifying legislation was never developed or passed. In the meantime, the issue of worker classification has become increasingly complex.
In Laymen’s Language this bill proposes that:
At this time, no vote has been taken by the Senate on this bill, and it has been sent to the Committee on Finance. If the bill manages to get adopted, employers will finally get to breathe a small sigh of relief. They will finally able to confidently apply clear guidelines, reducing the possibility of unintentional errors that result in findings of by an IRS audit.
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