From New Republic —
Rather than second-guessing the relationships between businesses and independent contractors and meddling in their financial arrangements, we should simply require independent contractors to register their “business” with the IRS and state agencies. This would assure greater transparency for both businesses and governments. We could also develop income withholding and tax reporting norms that better reflect how independent contractor relationships function.
Technology can help. Say you take a cab ride that costs $60 and you pay by swiping your credit card through Square. The technology exists, but not the current systems, to allow that $60 payment to be automatically reported to the IRS, and for a proper amount of withholding to be deducted. In this case, if $1 is Square’s merchant fee, and $59 goes to the cab driver, that $59 could be further segregated so that, for example, $57.23 goes to the driver’s account and $1.77 goes to the IRS to cover taxes.
Read the full story at Freelance Workers Penalized As Employees.