WDP -1706 Tax Update-

WDP -1706 Tax Update-: "For many years, the IRS has been on a crusade to recharacterize workers as employees, rather than ICs. Initially, this attitude could be attributed to the circumstance that employment relationships were subject to a higher level of employment (FICA) taxes than independent contractor relationships. Although employment taxes are now effectively the same on both types of relationships (unless a worker has multiple employers), the IRS has continued to view IC relationships with hostility and suspicion. This attitude is now largely attributable to administrative convenience; it is much easier to collect taxes through payroll withholding than by relying on the workers to make estimated tax payments. The IRS also feels that ICs may be claiming inappropriate business deductions.

The IRS's crusade against IC arrangements caused many taxpayers to complain to Congress. In many cases the IRS collected taxes twice because employers were forced to pay the IRS the amount of income and FICA taxes they should have paid or withheld from the 'wages' paid to 'employees,' even though the workers paid their own income and self-employment taxes."