Employee vs. Independent Contractor

Be Aware of New Legislation!
A new bill in the U. S. House of Representatives would amend the Internal Revenue Code of 1986 to include a provision that would only allow employers to avoid employment tax liability if they are able to show a “reasonable basis” for applying the independent contractor status.

The legislation would also significantly increase the penalties for employers that misclassify employees as independent contractors, including raising the minimum penalty for each incorrect tax return filed from $50.00 to $250.00 and raising the fine for each employer that intentionally disregard the filing requirement from $100.00 to $500.00 per tax return.

Under the bill, “reasonable basis” is met if there is a written determination classifying the worker, or a worker in a similar position, as an independent contractor; a completed employment tax examination classifying the worker as an independent contractor; or if the employer has not classified any worker performing a similar function (as defined by the Fair Labor Standards Act) as an employee for employment tax purposes any time after Dec. 31, 1977.

For more information on this topic, please contact Todd Jones with Anderson Jones, PLLC, Attorneys at Law, at (919) 277-2541 or by email!