U.S. Cracks Down on ‘Contractors’ as a Tax Dodge

[ProSense]

U.S. Cracks Down on ‘Contractors’ as a Tax Dodge

By STEVEN GREENHOUSE

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President Obama’s 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years. More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers.

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Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes for those workers. Companies do not withhold income taxes from contractors’ paychecks, and several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income.

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“This denies many workers their basic rights and protections and means less revenues to the Treasury and a competitive advantage for employers who misclassify,” said Jared Bernstein, who as executive director of Vice President Joseph R. Biden Jr.’s Middle Class Task Force has helped orchestrate the administration’s campaign against misclassification. “The last thing you want is to give a competitive advantage to employers who are breaking the rules.”

Organized labor, a strong supporter of Mr. Obama, has long complained about the practice. No administration has undertaken as big a crackdown as Mr. Obama’s, although administration and state officials deny they are doing it as a favor to labor.

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[karynnj]

1. This makes real sense and is easily justified just as being fair

I wonder if the legislation they will use is this bill introduced last December:

S.2882
Title: A bill to amend the Internal Revenue Code of 1986 to modify the rules relating to the treatment of individuals as independent contractors or employees, and for other purposes.
Sponsor: Sen Kerry, John F. (introduced 12/15/2009) Cosponsors (6)
Related Bills: H.R.3408
Latest Major Action: 12/15/2009 Referred to Senate committee. Status: Read twice and referred to the Committee on Finance.
Jump to: Summary, Major Actions, All Actions, Titles, Cosponsors, Committees, Related Bill Details, Amendments
SUMMARY AS OF:
12/15/2009--Introduced.

Taxpayer Responsibility, Accountability and Consistency Act of 2009 - Amends the Internal Revenue Code to: (1) require reporting to the Internal Revenue Service (IRS) of payments (including payments of amounts in consideration for property or of gross proceeds) of $600 or more made by or to corporations (other than tax-exempt organizations); (2) set forth safe harbor criteria and rules relating to the treatment of workers as employees or independent contractors; and (3) increase penalties for failure to file correct tax return information or comply with other information reporting requirements.

Requires the Secretary of the Treasury to issue an annual report on worker misclassification.
MAJOR ACTIONS:

***NONE***
ALL ACTIONS:

12/15/2009:
Sponsor introductory remarks on measure. (CR S13253-13254)
12/15/2009:
Read twice and referred to the Committee on Finance.

TITLE(S): (italics indicate a title for a portion of a bill)

***NONE***

COSPONSORS(6), ALPHABETICAL : (Sort: by date)


Sen Brown, Sherrod - 12/15/2009
Sen Durbin, Richard - 12/15/2009
Sen Harkin, Tom - 12/15/2009
Sen Kirk, Paul Grattan, Jr. - 12/15/2009
Sen Menendez, Robert - 12/15/2009
Sen Schumer, Charles E. - 12/15/2009

COMMITTEE(S):

Committee/Subcommittee: Activity:
Senate Finance Referral, In Committee

RELATED BILL DETAILS: (additional related bills may be indentified in Status)

Bill: Relationship:
H.R.3408 Related bill identified by CRS

Both Kerry and Schumer are powerful Finance committee members and Durbin is high in the Democratic Senate leadership.

Here was the announcement on that bill.

A bill introduced by Sen. John F. Kerry, D-Mass., Dec. 15 would toughen standards for employers in transportation and other industries that use independent contractors.
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Kerry’s bill, the Taxpayer Responsibility, Accountability and Consistency Act of 2009, would require companies to file reports with the Internal Revenue Service on each corporate provider of property and service to whom they pay more than $600 a year.

It would make additional changes to Section 530 to reduce abuses, Kerry and the bill’s co-sponsors, all Democrats, said. “This is about leveling the playing field and ensuring that America's workers receive the protections and pay they deserve,” he said.

The International Brotherhood of Teamsters applauded the bill, pointing to a U.S. Department of Labor study that found 30 percent of U.S. companies misclassified employees as independent contractors. Misclassification cost the federal government nearly $35 billion in tax revenue between 1996 and 2004, the Teamsters said.

http://www.joc.com/node/415311

[ProSense]

2. Good stuff. Thanks. n/t

[ProSense]

3. "No administration has undertaken as big a crackdown as Mr. Obama’s..." Judging from

Jerry Brown's efforts, this could be huge:

California’s attorney general, Jerry Brown, is seeking $4.3 million from a construction firm he accused of misclassifying employees. Last April, he won a $13 million judgment when a court ruled that two companies had misclassified 300 janitors, cheated the state out of payroll taxes and not paid minimum wage and overtime.

Surprised this is getting so little attention.

[Cha]

4. Thanks PS.

[WonderGrunion]

5. Linda McMahon's WWE has been using this a tax dodge for decades.

I wonder how this will shake up the Connecticut Senate race.