On September 22, 2020, the U.S. Department of Labor (the “DOL”) released a proposed regulation addressing when a service provider should be classified as an independent contractor rather than an employee. The change is important to both employers and service providers as each may find it advantageous to characterize service providers as independent contractors rather than part-time, full time or temporary employees. DOL welcomes public comments to the proposed new rules for a thirty (30) day period following publication in the Federal Register or by October 26, 2020.
As PLDO Partner William F. Miller explains in his essay, U.S. Department of Labor Proposes New Rule on Independent Contractors, the putative employer’s perspective and potential benefits of an “independent contractor” status include not having to withhold payroll taxes, pay for workers compensation insurance or include the individual in health insurance, 401(k) or other employee benefit plans. From the service provider’s perspective, he or she receives the gross amount charged for services rendered, without reduction for payroll withholding taxes and some expense that do not qualify as employee business expenses may become tax deductible on the service provider’s Form 1040, Schedule C.
To learn about the DOL’s current approach to classification determination, which is based on the “economic reality” test and a detailed overview of the proposed new rules, download his advisory here or click on the title above. If you would like more information, please contact Attorney Miller at 508- 420-7159 or email firstname.lastname@example.org.