August 02, 1995
Two Initiatives to Determine Whether
Workers Should be Treated as Employees or
WASHINGTON - Commissioner of
Internal Revenue Margaret Milner Richardson today announced two initiatives designed to
smooth the process of determining whether workers should be treated as employees or
"I've spent a lot of time talking to owners of small businesses who believe this
is a big problem," said Commissioner Richardson. "And I was not surprised that
it was designated the number one issue by the recent White House Conference on Small
Business. That echoes what I heard at the small business town meetings earlier this
"We can do better, and we will do better in handling worker classification
issues," said Commissioner Richardson, who stressed that the issues could not be
fully resolved without legislative changes.
The initiatives announced today, which are designed to assure that standards are
applied uniformly in all regions of the country, will:
- require IRS national office approval for any local project involving worker
classification issues, and
- provide additional training for all examiners dealing with worker classification issues.
Interested parties will be invited to comment on the new training materials, which will be
used in a program that will be completed by the end of the year.
The materials will emphasize the IRS policy that using independent contractors can be a
legitimate business practice.
IRS enforcement efforts will focus on serious deficiencies, such as situations where
employers classify workers as independent contractors and fail to issue required
information reports such as Form 1099.
These latest steps are part of a continuing effort by the IRS to improve the
administration of a complex law.
The IRS has a market segment understanding (MSU) initiative designed to resolve issues
at the national level by working with industry groups to agree upon guidelines that can be
used by both taxpayers and tax examiners. For example, one early MSU involves television
The IRS is working on guidelines with physical therapists, limousine drivers, home
delivery services and drywall contractors.
IRS is also working with the Treasury Department to find alternatives to current rules
in an effort to simplify tax administration.
"The small business community encouraged us to fix the way we handle
classification questions," said Commissioner Richardson. "And we have responded
with changes that should make life a little easier for everyone involved."
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