Senate Bill 2369, Independent Contractor Tax Classification and Compliance Act of 1982

GAO discussed S. 2369, the Independent Contractor Tax Classification and Compliance Act of 1982, a bill that seeks to resolve the issues which surround the classification of workers as either employees or self-employed for federal tax purposes. These issues led to Congress imposing a moratorium, which will expire on June 30, 1982, on employee-independent contractor determinations by the Internal Revenue Service (IRS). GAO supports the objectives and intent of the bill; it should ease the problems associated with classifying workers as employees or as independent contractors. Also, businesses will be able to make worker status determinations with more certainty and have less fear of unexpected and large retroactive tax assessments. In addition, the bill provides tools which should help IRS to improve contractor compliance with the tax laws. However, the bill will not eliminate the need for IRS reclassifications and retroactive assessments, and problems associated with those actions will continue to exist. Therefore, some legislative and administrative changes will be needed, particularly to reduce the potential for double taxation. In addition, IRS will be faced with an increased workload generated by the information-reporting provisions of the bill.