Earlier this week, The National Taxpayer Advocate, a position created by Congress to help the public deal with the tax system, released a 500-page report that covered, among other things, the topic of independent contractors as a major tax collection problem.
The IRS press release is available at www.irs.gov and includes this paragraph:
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Olson also proposes a legislative solution to the second most serious problem -- the over $132 billion tax gap attributable to income not reported by self-employed persons ($81 billion is attributable to independent contractor sole proprietors).
Currently, as you know, at the end of the year companies just send the government a 1099 documenting payment to an independent contractor as long as they were paid over $600. As such, there's very little visibility as to how much independent contracting is going on, outside of a household survey conducted by the Department of Labor.
The change that Olson proposes would give much better visibility into how much independent contracting is going on at any given time mid-year. If, you believe as I do, that there's a trend towards greater emphasis on using independent contractors, rather than full-time employees, it will be good to have better visibility of this metric to have a better understanding of how our economy is evolving.
It means more paperwork and regulations for everybody. On the bright side, for companies like SurePayroll, this would probably be a boon for business. Payroll is already a huge headache for small businesses. This will only exacerbate the pain. And in our business, our biggest competitors are Tylenol and Excedrin.
Best regards,
Michael D. Alter
President
SurePayroll
