If an employer has the right to control the worker's work - how and
what he does, the worker is an employee. If not, generally, the worker
is an independent contractor. The employer's tax treatment of each is
different and the workers have different tax rules that apply to them.
For example, a contractor can deduct her business expenses against her
business income while an employee must treat them as miscellaneous
itemized deductions only deductible to the extent that category of
deductions exceeds 2% of AGI.
This website, created and maintained by
Professor Annette Nellen, includes links to information from the IRS and other
government agencies on worker classification matters. There are also
links to legislative proposals to improve the worker classification
rules.
Information from the IRS and Congress
- IRS website on employment taxes -
here
- IRS Overview to 3 Classification Factors (based on 20 common law factors):
IRS Voluntary Classification
Settlement Program (VCSP)
Classification Settlement Program (CSP) - for
when taxpayer is under exam
MOU for Information Sharing and Stategizing
Between the IRS and DOL (Sept 2011)
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Joint Committee on Taxation Reports
GAO Reports
- Contingent Workforce: Size, Characteristics, Earnings, and Benefits (GAO-15-168R, 5/20/15)
- Employee
Misclassification: Improved Coordination, Outreach, and
Targeting Could Better Ensure Detection and Prevention,
GAO-09-717, August 10, 2009
-
Employee Misclassification: Improved Outreach Could Help Ensure
Proper Worker Classification, GAO-07-859T, May 8, 2007
-
Employment Arrangements: Improved Outreach Could Help Ensure
Proper Worker Classification, GAO-06-656, July 11, 2006
-
Issues
in Classifying Workers as Employees or Independent Contractors,
T-GGD-96-130, June 30, 1996
-
Issues
Involving Worker Classification,
T-GGD-95-224, August 2,
1995
-
Tax
Administration: Improving Independent Contractor Compliance with
Tax Laws, T-GGD-94-194 (8/4/94)
-
Approaches for Improving Independent Contractor Compliance,
GGD-92-108, July 23, 1992
- Senate Bill 2369, Independent Contractor Tax Classification
and Compliance Act of 1982,
118202,
April 26, 1982
- TIGTA,
Trust Fund Recovery Penalty Actions Were Not Always Timely or
Adequate (May 2014)
- TIGTA,
Employers Continue to Classify Workers as Independent Contractors,
Despite IRS Determinations to the Contrary, July 29, 2013
- TIGTA,
Employment Tax Compliance Could Be Improved With Better Coordination
and Information Sharing, March 23, 2010
- TIGTA,
While Actions Have Been Taken to Address Worker Misclassification,
an Agency-Wide Employment Tax Program and Better Data Are Needed
(2/04/2009)
- PERAB Tax Reform report includes tax gap proposal on Worker
Classification –
page 60
National Taxpayer Advocate Reports
- NTA 2003
page 256 - suggesting a modified withholding approach for
certain contractors
- NTA 2008
page
375 - proposals for simplification
- NTA 2013
page 197
- problems with SS-8 processing and repeat of
simplification suggestion for classification
- UK Classification Tool mentioned by
NTA -
here
Information from the Department of Labor & NLRB
Legislative Proposals and
Hearings
-
S. 1687 and H.R. 4611 (113th Congress) - Payroll Fraud
Prevention Act
-
S. 1706 and H.R. 4503 (113th Congress) - Fair Playing Field Act
-
H.R. 6128 (111th Congress) - Fair Playing Field Act of 2010 -
"to permit the Secretary of the Treasury to issue prospective
guidance clarifying the employment status of individuals for
purposes of employment taxes and to prevent retroactive assessments
with respect to such clarifications."
-
H.R. 3408 (111th Congress) - Taxpayer Responsibility,
Accountability, and Consistency Act of 2009 - "to modify the rules
relating to the treatment of individuals as independent contractors
or employees, and for other purposes."
-
Senate HELP Committee
hearing on June 17, 2010 - Leveling the Playing Field:
Protecting Workers and Businesses affected by Misclassification
Selected State Information
-
California
- California law including Unemployment Insurance Code -
here
- California Employment Development Department (EDD)
- Regulations under Title 22
- 4304-1
- Employee Defined
-
Per DE 40 -
"Title 22, California Code of Regulations, Sections 4304.2 through
4304-12, sets forth specific application of the common law rules for
specific industries. These regulations must be addressed when making
employee vs. independent contractor status determinations involving
a type of worker or service. The following types of services are
addressed:
-
Real Estate
Salespeople (Title 22, CCR, Section 4304.2)
-
Home Health
Care (Title 22, CCR, Section 4304.3)
-
Computer
Services (Title 22, CCR, Section 4304-4)
-
Artists
(Title 22, CCR, Section 4304-5)
-
Newspaper
Distribution (Title 22, CCR, Section 4304-6)
-
Product
Demonstrators (Title 22, CCR, Section 4304-7)
-
Security
Dealers (Title 22, CCR, Section 4304-8)
-
Language
Interpreters (Title 22, CCR, Section 4304-9)
-
Amateur
Athletic Officials (Title 22, CCR, Section 4304-10)
-
Process
Servers (Title 22, CCR, Section 4304-11)
-
Barbering
and Cosmetology (Title 22, CCR, Section 4304-12)"
-
California Labor Code Section
2753 and
226.8 as changed by
SB 459 (2011) to impose penalty for knowlingly advising
someone to treat an employee as a contractor or doing so
- Connecticut Department of Revenue
- Connecticut
Information on Worker Misclassification -
here
- Minnesota
- New York
- Basic info from the NY Dept of Labor
- Oregon
-
FAQs
about independent contractors (includes nice
chart
on varying classification rules)
- Texas Workforce Commission
- Vermont Department of Labor -
ABC test explained
Modern Economy Matters
- Rulings on worker classification for labor law matters from
District Court - No. Calif (March 2015)
- Both provide a good overview of how these companies operate
and the challenges of fitting the drivers into either the employee
or contractor slot.
- California Labor Commission ruling of June 2015 that ex-Uber driver is an employee
- Robert Reich,
"Why We're All Becoming Independent Contractors," Huffington
Post, 2/22/15
-
Renewed Focus on Worker Classification,
AICPA Corporate
Taxation Insider, 8/26/10
-
Worker Classification - Is Congress Ready to Take Action?
AICPA Tax Insider, 12/13/07
-
Articles
from Robert S. Schriebman
-
"The Common Law Employer Test and he
Affordable Care Act - Will Businesses Be Responsible for Temporary
Employees Assigned by Staffing Firms?"
by Bianchi and Lenz, Tax Management Memorandum, BloombergBNA, Feb.
2014
-
"Partners as Employees? Properly
Reporting Partner Compensation,"
by Noel Brock, The Tax Adviser,
11/1/13.
-
"Treating partners as employees: Risks to
consider," by Noel Brock,
Journal of Accountancy,
August 2014
-
"McGladrey submits comments on treatment
of partners as employees,"
8/5/14 (letter
to IRS and Treasury)
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