It could be time for workers and employers to investigate whether to recharacterize a worker’s job status due to the New GIG Act of 2017 and the Tax Cuts and Jobs Act of 2017.
The New GIG Act of 2017 amends the Internal Revenue Code to establish a test for determining if a worker should or could be classified as an independent contractor rather than as an employee for tax purposes.
The factors of the test include:
- The relationship between the parties (i.e., the worker incurs expenses; does not work exclusively for a single employer; performs the service for a particular amount of time, to achieve a specific result, or to complete a specific task; or is a sales person compensated primarily on a commission basis);
- The place of business or ownership of the equipment (i.e., the worker has a principal place of business, does not work exclusively at the employer’s place of business and provides tools or supplies); and
- The services are performed under a written contract that meets certain requirements (i.e., specifies that the worker is not an employee, the employer will satisfy withholding and reporting requirements, and that the worker is responsible for taxes on the compensation).
The Tax Cuts and Jobs Act of 2017 has created a new Pass-Through Deduction which could afford a 1099 independent contractor with a 20 percent deduction for “qualified business income.” The Pass-Through Deduction phases out for an independent contractor with taxable income in excess of $157,500, or $315,000 in the case of a joint return.
Of course, there are many other issues for independent contractors and employers to consider, such as health insurance and other benefits offered by employers. At a minimum, it is certainly time to reconsider a worker’s job status.
As always, let us know if we can help or if you have any questions.
Shareholder, Berman Fink Van Horn P.C.