Tax proposals released in conjunction with the Administration's FY 2011 Budget contain provisions relating to the use of Section 530 of the Revenue Act of 1978. The new proposal would permit the IRS to reclassify workers on a prospective basis, and would permit the IRS to issue generally applicable guidance about the proper classification of workers. This is in direct contravention to current Section 530 protections.
New enforcement activity would likely focus on obtaining proper worker classification prospectively, recognizing that in many cases the proper classification of workers may not be clear. Additionally, the proposal provides for reduction or elimination of penalties in the case of small employers where the employer agrees to prospective reclassification.
2011 Administration Budget Targets Misclassification
Wednesday, February 3, 2010 by
Transportation Lawyer
The fiscal year 2011 budget continues President Obama's efforts to target alleged employer misclassification of employees as independent contractors by characterizing misclassification as an issue that has a budgetary impact as a result of decreased tax collections. As part of the budget, the Departments of Treasury and Labor are pursuing a joint proposal to enhance the ability of both agencies to penalize employers who misclassify, eliminates legal incentives for employers to misclassify, and restores employee protections lost due to alleged misclassification. The budget also includes an additional $25 million for the Department of Labor to hire additional enforcement personnel and to encourage state action regarding the issue.
In addition to the budget proposals, two bills are pending in Congress that would seek to limit misclassification by changing the application of the IRS Section 530 safe harbor provisions and making it more difficult to establish a reasonable justification for using independent contractors. It remains to be seen what impact these proposals will have on the well established use of owner-operators in the trucking industry.
In addition to the budget proposals, two bills are pending in Congress that would seek to limit misclassification by changing the application of the IRS Section 530 safe harbor provisions and making it more difficult to establish a reasonable justification for using independent contractors. It remains to be seen what impact these proposals will have on the well established use of owner-operators in the trucking industry.
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