Academic journal article Journal of Accountancy

New Independent Contractor Bill

Academic journal article Journal of Accountancy

New Independent Contractor Bill

Article excerpt

New legislation was introduced in the House on April 23 that would clarify the difference between independent contractors and employees for federal tax purposes. The Independent Contractor Tax Simplification Act of 1998 (HR 3722), sponsored by Congressman Jon Christensen (R-Neb.), provides a simple set of criteria for determining who is not an employee.

Currently, worker classification is determined by applying common-law standards which have not changed in decades. Based on these standards, the IRS created a 20-factor common-law test that focuses on the employer's control over when, where and how the work gets done. It has been argued that this test not only is ambiguous and difficult to apply but also has been rendered obsolete by modern telecommuting techniques.

HR 3722 substitutes for the 20-factors a simple three-part test that examines the service provider's investment, workplace and written documentation. The service provider is not considered to be an employee and the service recipient is not considered to be an employer if the criteria are met in all three parts. …

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