1099 Risk Blog

Independent Contractor Bill Reintroduced in Congress

Just before the August break, Congressman Jim McDermott (D-Wash) introduced H.R.3408, The Taxpayer Responsibility, Accountability and Consistency Act of 2009 in Congress. Sound familiar? This is substantially the same piece of legislation as The Taxpayer Responsibility, Accountability, and Consistency Act of 2008 (H.R.5804).

Like its predecessor, the bill has been referred to the House Ways and Means Committee. The bill has 6 co-sponsors at this time, compared to H.R.5804 which had won the support of 37 co-sponsors before dying an untimely death when the Congressional slate was swept clean. The bill would strike Section 530 of the Revenue Act of 1978 (Safe Harbor), dramatically increase penalties for misclassification, and require the Treasury to report annually on misclassification issues.

I have been expecting that one or more bills addressing the problem of improper independent contractor classification would be reintroduced into the current Congressional session before the fall. Between the severe recession highlighting revenue shortfalls due to taxpayer noncompliance, and a new pro-labor administration, strong forces are at work.

It remains to be seen if the other bills from the previous session (Obama’s own S.2044 Independent Contractor Proper Classification Act of 2007, and S.3648 / H.R.6111 The Employee Misclassification Prevention Act, sponsored by Senators Obama, Kerry, and Kennedy) will be reintroduced before year end, and in what form.

My hunch is that Congress may be working on a combined form of S.2044 / S.3648, pulling in elements of each bill for a one-stop-shopping legislative move that will be even stronger than the measures proposed in H.R.3408. One way or another, most industry analysts fully expect Section 530 Safe Harbor to go away very soon. 

No matter what happens, we’ll keep you informed on this blog, so click the orange RSS feedburner link to subscribe, or just bookmark our main blogs page. If you’d like to follow the progress of the bill with me, I’ve added a widget to our Independent Contractor Legislation Tracker page, and I’ve linked the full text of H.R.3408 for your reading pleasure here: http://www.opencongress.org/bill/111-h3408/text.

More on the bill: according to other sources, "the bill would make it more difficult for employers to avoid employment tax liability if they have misclassified a worker as an independent contractor and significantly increase employer penalties in the event of the misclassification."

Just as it is better to patch the roof while the sun is shining and before the coming rainstorm hits, it's best to get your independent contractor compliance program up to speed with best practices now. Don't wait for the rain; we all know it's coming.

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