Tax Administration: Issues Involving Worker Classification (Testimony,
08/02/95, GAO/T-GGD-95-224).

Ensuring the appropriation classification or workers for federal tax
purposes--either as employees or independent contractors--have been of
longstanding concern to GAO.  This testimony makes four central points.
First, the common law rules used by the Internal Revenue Service (IRS)
for classifying workers remain as unclear and subject to conflicting
interpretation as GAO found them in 1977.  Second, although it
recognizes this ambiguity, IRS feels responsible as the nation's tax
administrator to enforce tax laws and rules. Third, in addition to
classification rule clarification and compliance audit, GAO believes
that two other approaches could help improve independent contractor
compliance--(1) require businesses to withhold taxes from payments to
independent contractors and (2) improve business compliance with the
requirements to file information returns on payments to independent
contractors.  Fourth, aside from tax issues, changes to the
classification rules must take into account the body of law that creates
a safety net for American workers.  Many laws apply only to employees
and do not protect workers classified as independent contractors.  A
byproduct of classification rule clarification could be a change in the
number of workers considered to be independent contractors.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-GGD-95-224
     TITLE:  Tax Administration: Issues Involving Worker Classification
      DATE:  08/02/95
   SUBJECT:  Personnel classification
             Contractors
             Reporting requirements
             Tax law
             Tax return audits
             Income taxes
             Liability (legal)
             Tax administration
             Noncompliance
             Taxpayers
IDENTIFIER:  IRS Employment Tax Examination Program
             
------------------------------------------------------------------------

We regret that electronic text of GAO Testimony is not available at 
this time. 

See the GAO FAQ - Section 2.0 for printed copy ordering information.
The FAQ is automatically retrieved with all WAIS search results or 
can be obtained by sending e-mail to: [email protected]