For now, the proposed rule is just that--proposed. Interested parties had until October 26, 2020 to submit comments in writing for consideration before the rule was adopted. Ostensibly, the reason for the rule is to “to promote certainty for stakeholders, reduce litigation, and encourage innovation in the economy.”
In the past, the general standard for determining who is a bona fide employee centered on the degree of interdependence between the contractor and the business paying for their services. This took the form of evaluation by “economic reality” rather than services provided.
The proposed rule still makes use of the “economic reality” test, and the factors in play are very similar to the old measure. However, greater weight is given to “core factors” identified under the rule. Also, other definitions have been slightly retooled.
Here are some key points of the new rule:
The difference between an employee and an independent contractor is found in benefits like insurance, safety standards, and the legal obligations of an employer to an employee. Oftentimes, employers create payroll tax issues for themselves when they declare workers to be independent contractors or falsify their employment roll.
The rule revises some definitions that could be overruled by state law or by a court down the line. For now, the proposed rule offers an inside look at new standards employers might use to solve the somewhat sticky problem around classifying their workers as employees or contractors.
With offices in Chicago and Cleveland, the tax lawyers at Robert J. Fedor, Esq., LLC offer informed guidance if you are dealing with employment tax disputes, a civil tax audit, or a criminal tax charge. Call us at 800-579-0997 or contact us online when you need a skilled tax attorney you can count on.