A bill recently proposed in the House would change the Internal Revenue Code of 1986 to modify the classification of employers and employees.
“Currently, it is difficult and overly complicated for businesses to use independent contractors, which limits companies’ growth and individuals’ work,” said Rep. Erik Paulsen (R-MN), who introduced H.R. 3396 on July 25. He added that this legislation “provides clarity and guidance for businesses so they know they are properly classifying independent contractors without fear of IRS penalties.”
The contents of the bill are not available yet, but the Customized Logistics and Delivery Association, an advocate of the bill, said the legislation would provide benchmarks for defining a worker’s employment status.
“This bill provides much-needed clarity and guidance for businesses that partner with independent contractors to provide the flexibility of their workforce they need to meet customer needs,” said John Benko, CLDA president. He noted that in a recent survey, over 89% of CLDA members said that their ability to use independent contractors was important to their business success.
“Independent contractors are the backbone of our industry,” Benko added, “allowing us to be responsive and flexible enough to meet changing customer demands. This bill brings clarity and transparency to the definition of an independent contractor, enabling all industries that depend on them to remain in compliance and to properly classify them.”
The association clarified that back in 1978, Congress authorized Section 530 of the Revenue Act of 1978 to provide a safe-harbor for organizations with respect to the employment classification of individuals. “This came as a result of inconsistent employment tax audits where the definition of ‘employee’ was unclear. Congress affirmatively acted to make the Section 530 Safe Harbor permanent in 1982. However, this issue wasn’t included in tax reform in 1986 and therefore was not codified as part of the Internal Revenue Code.”