Core Provisions: H.R.5804 is intended to make it more difficult for employers to classify workers as independent contractors.  The bill removes the current safe harbor provision in the U.S. Tax Code, which allows employers to avoid paying social security taxes and withholding taxes for employees improperly classified as independent contractors.  Currently, the IRS is prohibited from seeking employment taxes from employers which reasonably classify workers as independent contractors, even when in error.  H.R.5804 removes this safe harbor and would allow the IRS to collect unpaid taxes for misclassified workers.  The bill also increases fines to employers for misclassifications, requires employers to provide information regarding large payments to independent contractors to the IRS, and allows workers to seek an IRS review of their classification status.

Status: H.R. 5804 was introduced in the House by Rep. McDermott (D-WA) on April 15, 2008, and was referred to the House Committee on Ways and Means.