JUST WHAT THE DOCTOR ORDERED
WORRY-FREE FOR 5 FULL YEARS
2020 2020 2020 2020 2022
Despite the DOL’s memorandum of understanding with states and the
IRS, which has not been withdrawn, the IRS and 39 states have been
sharing worker classification information for several years. 14 States
each follow their own tests to determine worker classification. For
example, New Jersey follows the ABC test, 15 which is similar to the
DOL’s economic realities test, and California follows an application of
the economic realities test. 1
SUMMARY AND THOUGHTS
Worker misclassification is costly. The IRS, DOL, and states all have
different tests for determining worker classification, and all three agen-
cies share information. To eliminate a costly misclassification, consider
using VCSP. Better yet, classify properly.
1. Worker classification–what’s new is old again. Talk presented at: American Bar
Association Section of Taxation Meeting; January 29, 2016; Los Angeles, CA.
2. Worker classification: Employee or independent contractor? Talk presented at: IRS Office
of Chief Counsel Meeting; August 13, 2008; Atlanta, GA.
3. IRC § 3509 4. 23. 8. 5.
4. American Bar Association Section of Taxation Meeting; September 24, 2010;
5. IRS Rev. Rul. 87-41 C.B. 296 § 3111 (1987).
6. Internal Revenue Service, US Dept of the Treasury. Independent Contractor or
Employee? Washington, DC: Internal Revenue Service; 1996. IRS course
7. IRS Pub. Ltr. Rul. 200323022 (2003).
8. Prescott WP, Altieri MP, VanDenHaute KA, Tietz RI, Worker Classification Issues:
Generally and in Professional Practices. The Practical Tax Lawyer, 2017; 31( 2):
9. Treas. Reg. 26 CFR § 31.3121(d)- 1(a)( 3).
10. Sargent v Commissioner, 93 T.C. 572 (1989), 929 F.2d 1252 (8th Cir 1991).
11. Dutch Square Medical Center Limited Partnership v United States, 74 A. F. T.R. 2d
1994-6356, 94-2 USTC (DSC 1994).
12. Hook SK. DOL withdraws joint employer and independent contractor
administrator’s interpretations. Wage & Hour Law Update website. http://www.
dol-withdraws-joint-employer-and-independent-contractor-administrators-interpretations. Published June 9, 2017. Accessed June 23, 2017.
13. U.S. Secretary of Labor withdraws joint employment, independent contractor
informal guidance [news release]. Washington, DC: Department of Labor Office
of Public Affairs; June 7, 2017. https://www.dol.gov/newsroom/releases/opa/
14. Worker classification challenges—the hinge on which so many tax and
businesses turn. Talk presented at: American Bar Association Section of
Taxation Meeting; May 8, 2010; Washington, DC.
15. Hargrove v Sleepy’s LLC, A- 70-12, 072742 (3rd Cir 2015).
WILLIAM P. PRESCOTT, JD, EMBA, of the law firm
Wickens, Herzer, Panza, Cook, & Batista Co. in Avon, Ohio, is a
practice transition and tax attorney and a former dental
equipment and supply representative, whose upcoming book,
Joining and Leaving the Dental Practice (3rd edition), is
scheduled for release in January 2018. For this and his other
publications, visit PrescottDentalLaw.com. Contact him at
(440) 695-8067 or WPrescott@WickensLaw.com.
More FREE Facts Circle 17 on card