In another potential challenge to longstanding assumptions about the nature of the relationship between companies and workers, the Treasury Department announced plans this month to study closely the standards, practices, and tax treatment currently applied to independent contractor work arrangements, as part of a broader effort to improve the collection rate for federal taxes.
It is too early to know whether the Treasury Department’s focus will be limited simply to tax collection mechanisms or will include a more systemic review of independent contractor status. IRS representatives have, for example, in recent years, floated the idea of requiring companies to withhold taxes from payments made to non-wage workers. If, however, the Treasury Department opts to scrutinize the factors distinguishing independent contractors from employees, it opens the possibility that some individuals performing work for companies under independent contractor agreements might, in fact, be statutory employees on whose behalf companies should be (and arguably should have been) withholding income taxes and paying payroll taxes (such as FICA and FUTA). Estimates suggest that at least 120,000 individuals operate as independent registered representatives, affiliated with, but not employed by, brokerage firms.
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