TAX FILE: Watch for worker classification

Tucked into the Bush administration's fiscal 2007 budget is are two compliance initiatives that could affect trucking businesses that use independent contractors, leased drivers or other workers supplied by a third party. Under the heading “Close the tax gap,” the administration proposes to “clarify the circumstances in which employee leasing companies and their clients can be held jointly liable for federal employment taxes…. In addition, the Department of Treasury will study the standards used to distinguish between employees and independent contractors for purposes of withholding and paying federal employment taxes.” Unlike many budget proposals, these do not require congressional approval, although the administration might ask for legislation if it decides it cannot improve compliance solely through its own initiatives.