End of independent contractor?

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Mar 2, 2009 4:41 pm

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There
is a piece of proposed legislation that could change the way independent b/ds
classify affiliated reps for tax purposes. Both the Obama administration, labor
unions and House Representative Rob Andrews of New Jersey have supported
legislation which could be devastating to IBDs. The bill failed to move out of
committee during the last Congress, but Rep. Andrews confirmed he plans to
reintroduce legislation this year: the Employee Misclassification Prevention
Act of 2008, introduced by Rep. Robert Andrews and supported by Congress
members, Lynn Woolsey, George Miller, Mike Michaud—and almost all the
Democratic members of the Committee on Education and Labor. While the
legislation is aimed at other industries (Fed Ex drivers who some say should
not be classified as indie contractors), the securities space could also be
adversely affected.

 

FSI says “The bill would have had
serious consequences for independent broker-dealers by taking away an important
feature in Section 530 of the Revenue Act of 1978 (as amended), the safe
harbor provision in the Federal Income Tax Code.”

 

Essentially, the bill could potentially
eliminate the safe harbor provision which allows b/ds to exercise
legally-required supervisory responsibilities over associated RRs without
giving up the right to classify them as independent contractors. In addition to
opening IBDs up to IRS scrutiny (which could result in back taxes, penalties,
and other tax-related costs), b/ds might have to revamp their business model if
independent contractor reps had to then be classified as employees.

Thoughts?

Mar 2, 2009 4:55 pm

There's certainly an issue here.  The B/D  retains a lot of power over people who are not their employees.

Mar 3, 2009 10:48 pm

Write your congressperson or senator...