Tax file: Worker classification resurfaces

June 1, 2007
Congress and the U.S. Tax Court have each shown renewed interest in an old issue-the proper classification of workers as employees or independent contractors.

Congress and the U.S. Tax Court have each shown renewed interest in an old issue-the proper classification of workers as employees or independent contractors. On May 8, two subcommittees of the House Ways and Means Committee held a joint hearing in which most witnesses argued for doing more to ensure that tax is collected from contractors and from employers that misclassify workers. One Republican member, Phil English, asked if payments to all independent contractors should be subject to withholding. Such a step could have a major effect on cash flow for owner-operators.

On March 21, the Tax Court sided with the Internal Revenue Service that Peno Trucking had no reasonable basis for treating drivers as independent contractors. The decision breaks no new ground, but it has been rare in recent years for such cases even to get to court.

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KEN SIMONSON

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