CPA Daily News
•Biden Supports New Legislation on Misclassified Workers
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Biden Supports New Legislation on Misclassified Workers
Vice President Joe Biden supports new House and Senate legislation that would provide guidance on the proper classification of workers. The legislation is called the “Fair Playing Field Act of 2010.” It was recently introduced in the House of Representatives (H.R. 6128) by Rep. James McDermott (D-Wa.) and in the Senate (S. 3786) by Senator John Kerry (D-Mass.).
The legislation would repeal Section 530 of the Revenue Act of 1978. Under Section 530, employers that meet the following three requirements are protected from potentially large employment tax assessments, even though they incorrectly categorized a worker as an independent contractor: (1) reasonable basis, (2) substantive consistency, and (3) reporting consistency. An employer can meet the “reasonable basis” requirement if judicial precedent, IRS rulings, a past IRS audit, or industry practice supports the classification of a worker as an independent contractor. An employer meets the substantive consistency requirement if it (and any predecessor business) consistently treated the workers in question as independent contractors. The reporting consistency requirement is met if the employer has not classified the workers as employees on any required federal tax returns, including information returns.
The legislation would also lift the current moratorium on the issuance of federal regulations and revenue rulings that would make it easier to understand the worker classification rules. Any new guidance on the worker classification rules would only be applied on a prospective basis.
“When employees are classified as independent contractors, whether by design or because the rules are unclear, they are denied access to critical benefits and protections, at significant cost to government at all levels,” said Vice President Biden. “For these reasons, stopping worker misclassification is a priority for the President's Middle Class Task Force, which I chair, and I applaud Senator Kerry and Congressman McDermott for introducing this bill. The legislation is timely, as misclassification is an increasing problem, one that puts employers who properly classify their workers at a disadvantage in the marketplace and costs the government billions of dollars in unpaid taxes. I urge the Congress to stand up for workers and create a level playing field for law-abiding businesses by supporting this bill” [Senator Kerry Press Release, 9/15/10; http://kerry.senate.gov/press/release/?id=cd7f5a6e-7feb-41ae-8e8f-6004669821fc].
The McDermott bill has been referred to the House Ways and Means Committee. The Kerry bill was forwarded to the Senate Finance Committee.