Will the IRS Finally Stop Independent Subcontractor Scams?

Citizen Wealth Financial Justice

86544983-550x220Houston           One of the largest and best known ways that workers are ripped off is known euphemistically as “classification,” meaning whether a worker is classified as an employee or an independent subcontractor.  The Department of Labor has largely failed to police this area effectively which has led to an accelerating rate of casual or contingent employment in recent decades under the rubric of the self-employed or independent subcontractors or freelancers or whatever you may want to call them.  Some are now arguing there may be hope for some of these workers because there is a  new sheriff in town because of the heightened scrutiny forced under the mandatory coverage provisions of the Affordable Care Act, and, big drum-roll, it’s the IRS to the rescue of workers.  Who would have ever thought it?  Is this hope or hype though?

The reason and wherefore is straightforward.  Employers with more than fifty (50) workers have to provide health care.  Not surprisingly a lot of employers would just as soon noodle around that magic number and many have talked plainly about how they might be able to reclassify enough of their workers as part time or subcontractors to put their direct workforce to below the fifty worker requirement.

It goes without saying that employers have a lot of incentives to cheat their workers, not just on health insurance.  As contractors, a worker is responsible for their own social security, Medicare payments, and regular taxes.   As direct employees, a worker matches only half of such payroll based taxes and their bosses pay the other half.

The IRS told the New York Times though that they were going to handle this classification concern through their “employment tax examination program” and a form, the SS-8.  Frankly, that doesn’t sound like a new sheriff at all.  That sounds like a rent-a-cop driving around the neighborhood that never gets out of their cars in an urban fake policing security scheme.  It reminds me of when the IRS had the responsibility of making sure that household domestic workers were actually paid the federal minimum wage beginning in 1978 and had social security paid for their labor.   Our Household Workers Organizing Committee in New Orleans successfully sued the IRS for enforcement of the minimum wage at least for the few brave souls paying social security taxes, but even that was a fight to win in the settlement.  And, decades later it’s still honored more in the breach as millions of informal workers are paid less than the minimum with no benefits.

This problem urgently needs to be solved, but so far the IRS as the solution sounds more like hope than it does a plan.


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