Avoiding Liability for Independent Contractor Misclassification May Become Harder if New House Bill Passes.

A house bill has recently been introduced that will significantly change the liability of misclassifying employees as independent contractors.

A bill concerning employee status was introduced in the House on July 30 by Rep Jim McDermott (D-Wash). The bill, H.R. 3408 or Taxpayer Responsibility, Accountability, and Consistency Act of 2009, makes it substantially harder to avoid employment tax liability for misclassifying an employee as an independent contractor, repealing the safe harbor provisions of current Section 530 in the Code. The bill also states “any individual who performs services for a taxpayer may petition (either personally or through a designated representative or attorney) for a determination of the individual’s status for employment tax purposes”. In addition, H.R. 3408 would significantly increase (by 1,200% with some fines) employer penalties for misclassification.