Independent Contractor Tax Fairness and Simplification Act of 2015 Seeks to Eliminate “Safe Harbor” for Businesses

Independent Contractor Compliance Blog by Pepper Hamilton

From JDSupra, Richard J. Reibstein of Pepper Hamilton provides a terrific analysis of the differences between the bill recently filed by Representative Erik Paulsen (R-Minn) and legislation proposed in late 2013 by 8 Democratic Senators.  Richard writes:

Key Differences

There are a number of key differences between this bill proposed by Republican Paulsen and the Fair Playing Field Act bill proposed by Democrats. The latter bill, if it were to be re-introduced and enacted, would require the Secretary of the Treasury to issue regulations or other prospective guidance clarifying the employment status of individuals for federal employment tax purposes.  On the other hand, this new bill, H.R. 2483, specifically prohibits the issuance of new regulations or Revenue Rulings by the Department of the Treasury with respect to the employment status of any individual for employment tax purposes.

While both bills expressly state that the term “employment status” shall mean the classification of an individual as an employee or IC “under the usual common law rules,” H.R. 2483 (unlike the Fair Playing Field Act bill) would codify a new form of “safe harbor” if the worker meets all four of the following factors:

  • incurs significant financial responsibility for providing and maintaining equipment and facilities;
  • incurs unreimbursed expenses or risks income fluctuations because remuneration is “directly related to sales or other output rather than solely to the number of hours actually worked or expenses incurred”;
  • is compensated on such factors as percentage of revenue or scheduled rates and not solely on the basis of hours or time expended; and
  • “substantially controls the means and manner of performing the services” in conformity with regulatory requirements, or “the specifications of the service recipient or payor and any additional requirements” in the parties’ written IC agreement.

Read the full story at Independent Contractor Tax Fairness and Simplification Act of 2015 Seeks to Eliminate “Safe Harbor” for Businesses 

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