Tax Administration

Issues in Classifying Workers as Employees or Independent Contractors Gao ID: T-GGD-96-130 June 20, 1996

To determine the social security and unemployment taxes they need to pay on employee wages, employers must classify workers as employees or independent contractors. The Internal Revenue Service (IRS) estimates that about 750,000 of the more than 5 million employers (15 percent) misclassified 3.4 million employees as independent contractors in 1984. Factors such as costs and confusion can contribute to misclassification. This testimony highlights the main points raised in GAO work dating back nearly 20 years on the proper classification of workers.



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