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Washington Labor & Employment Wire » The Taxpayer Responsibility, Accountability, and Consistency Act of 2009 (S. 2882)

The Taxpayer Responsibility, Accountability, and Consistency Act of 2009 (S. 2882)


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Core Provisions: This legislation would amend the Internal Revenue Code to modify the rules concerning the treatment of independent contractors to make it more difficult and costly for businesses to incorrectly classify employees as independent contractors.

In addition to significantly increasing the amount of penalties associated with filing tax returns with incorrect information concerning individuals’ employment status, the bill would change the “safe harbor” provisions of section 530 of the Revenue Act of 1978, which allows employers to designate employers as independent contractors for employment tax purposes, regardless of the workers status as an independent contract under common law test, unless the employer has no “reasonable basis” for such treatment. The amended safe harbor provision would only considered a business to have such a reasonable basis for classifying a worker as an independent contractor if it, or its predecessor, has not treated any other individual holding a substantially similar position as an employee since December 31, 1977, and the business’s treatment of the worker as an independent contractor is in reasonable reliance on: (1) “a written determination … addressing the employment status of the individual or an individual holding a substantially similar position” with the business; or (2) ” a concluded examination (for employment tax purposes) of whether the individual (or an individual holding a substantially similar position) should be treated as an employee ….”

If passed into law, the bill would also grant individuals classified as independent contractors the right to petition the Secretary of the Treasury for a determination of their status for employment tax purposes.

Status: Senator J. Kerry (D-MA) introduced the legislation on December 15, 2009, and it was referred to the Senate Committee on Finance.