TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, November 22, 2017

Oei & Ring: Will Proposed Tax Legislation Tilt The Worker Classification Debate?

Shu-Yi Oei & Diane Ring (On Labor), Will Proposed Tax Legislation Tilt the Worker Classification Debate? 

Tax reform is in the air. On Thursday, November 9, Senate Republicans released a Description of the Chairman’s Mark (prepared by the Joint Committee on Taxation (JCT)), which contains in substance the Senate version of proposed tax reform legislation. Among other things, that JCT description stated that the bill would clarify the treatment of many workers as independent contractors by providing a safe harbor that, if satisfied, would guarantee such treatment. But in the modification to the Chairman’s Mark released on November 14, that safe harbor provision was stricken from the Senate bill.

In a blog post on TaxProf Blog, we expressed concern about this worker classification clarification provision. In brief, our worry was that even though the legislation “clarifies” the treatment of workers as independent contractors and arguably simplifies some aspects of their tax compliance burdens, it also carries potentially important ramifications for broader fights over worker classification that are occurring in the labor and employment law area.

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November 22, 2017 in Congressional News, Gov't Reports, News, Shuyi Oei, Tax | Permalink | Comments (0)

Friday, November 17, 2017

National Taxpayer Advocate Blog: Caring About “Sharing” — The IRS Should Do More For Participants In The Gig Economy

Taxpayer Advocate (2016)NTA Blog, Caring about “Sharing” – The IRS Should Do More for Participants in the Gig Economy:

In this blog post, I will discuss how the IRS has been dealing with a growing sector of our economy called the “sharing” economy (also known as the gig economy). Proponents of the sharing economy believe it promotes marketplace efficiency by enabling individuals to generate revenue from assets while the assets are not being used personally. For example, a vacation home owner may rent out her home while she is not using it. Airbnb (short-term home rentals) and Uber (shared car services) are two of the more prominent companies that facilitate a sharing economy.

Nearly a quarter of the U.S. population earns money from the sharing economy. Although it may be growing at a healthy rate, I want to make clear that not all sharing economy participants are finding it to be a very lucrative endeavor. On the contrary, data show that the vast majority – 85 percent – earn less than $500 per month from their gigs.

Furthermore, many of the service providers are simply unfamiliar with the tax filing and recordkeeping requirements. Service providers in the sharing economy may not fit the mold of the traditional employee who works “9 to 5” and receives a Form W-2 from one employer. Rather, a service provider in the sharing economy may have to take on multiple gigs to help make ends meet, making it difficult to track and allocate expenses among the various gigs. The majority of them do not receive any tax information from the sharing economy platform they use to earn their income. This demonstrates both the need for guidance from the IRS and the opportunity to create a culture of tax compliance among participants in the sharing economy from the outset. Establishing the tax compliance norms for this emerging industry in its infancy will assist the IRS as this segment of taxpayers grows. 

This leads us to the question, “What can the IRS do to help sharing economy participants comply with their tax obligations?” First, when looking at noncompliance, it is important to distinguish between the various types of noncompliance the IRS encounters. Not all noncompliant taxpayers are willfully noncompliant; many of them are tripped up by “unknowing” or “lazy” noncompliance. That is, some taxpayers are simply unaware of their tax compliance obligations. Many sharing-economy entrepreneurs and merchants have never operated a small business and need to understand certain basic tax obligations (i.e., making required quarterly estimated payments throughout the year to avoid penalties).

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November 17, 2017 in Gov't Reports, IRS News, News, Shuyi Oei, Tax | Permalink | Comments (0)

Thursday, November 16, 2017

NY Times: She Took On Colombia’s Soda Industry. Then She Was Silenced.

New York Times, She Took On Colombia’s Soda Industry. Then She Was Silenced.

BOGOTÁ, Colombia — It began with menacing phone calls, strange malfunctions of the office computers, and men in parked cars photographing the entrance to the small consumer advocacy group’s offices.

Then at dusk one day last December, Dr. Esperanza Cerón, the head of the organization, said she noticed two strange men on motorcycles trailing her Chevy sedan as she headed home from work. She tried to lose them in Bogotá’s rush-hour traffic, but they edged up to her car and pounded on the windows.

“If you don’t keep your mouth shut,” one man shouted, she recalled in a recent interview, “you know what the consequences will be.”

The episode, which Dr. Cerón reported to federal investigators, was reminiscent of the intimidation often used against those who challenged the drug cartels that once dominated Colombia. But the narcotics trade was not the target of Dr. Cerón and her colleagues. Their work had upset a different multibillion-dollar industry: the makers of soda and other sugar-sweetened beverages.

Their organization, Educar Consumidores, was the most visible proponent of a proposed 20 percent tax on sugary drinks that was heading for a vote that month in Colombia’s Legislature. The group had raised money, rallied allies to the cause and produced a provocative television ad that warned consumers how sugar-laden beverages can lead to obesity and diet-related illnesses like diabetes.

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November 16, 2017 in News, Shuyi Oei, Tax | Permalink | Comments (0)

Saturday, November 11, 2017

Oei & Ring: The Senate Tax Bill And The Battles Over Worker Classification

Shu-Yi Oei (Boston College) & Diane M. Ring (Boston College), The Senate Tax Bill and the Battles over Worker Classification:

Senate Republicans released their version of tax reform legislation on Thursday, November 9. The legislative language is not available yet, but the Description of the Chairman’s Mark (prepared by the Joint Committee on Taxation) suggests that one of the key provisions in the bill will clarify the treatment of workers as independent contractors by providing a safe harbor that guarantees such treatment. The JCT-prepared description tracks the contents of the so-called “NEW GIG Act” proposed legislations introduced by Congressman Tom Rice (R-S.C.) in the House and Senator John Thune (R-S.D.) in the Senate in October and July 2017, respectively. “NEW GIG” is short for the “New Economy Works to Guarantee Independence and Growth (NEW GIG) Act.” But notably, and as we further discuss below, the legislation is not limited in its application to gig or sharing economy workers.

Assuming the Senate Bill adopts the basic parameters of the NEW GIG proposed legislation — which looks to be the case based on the JCT-prepared description — we have some concerns. In brief, this legislation purports to simply “clarify” the treatment of workers as independent contractors and to make life easier for workers by introducing a new 1099 reporting threshold and a new withholding obligation. But the legislation carries potentially important ramifications for broader fights over worker classification that are raging in the labor and employment law area. Despite possibly alleviating tax-related confusion and reducing the likelihood of under-withholding, we worry that there are quite a few underappreciated non-tax hazards for workers if these provisions go through.

Summary of the Legislation

The legislation (assuming the Senate Bill more or less tracks the NEW GIG Act language) purports to achieve such “clarification” of worker classification status by doing the following:

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November 11, 2017 in Congressional News, News, Political News, Shuyi Oei, Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Tuesday, November 7, 2017

New 'Paradise Papers' Data Leak

Paradise PapersA new investigative report from the International Consortium of Investigative Journalists (ICIJ) and its media partners broke on Sunday. (ICIJ is the investigative journalist consortium that brought us last year's Panama Papers investigation, for which they won a Pulitzer for Explanatory Reporting.)

ICIJ: Offshore Trove Exposes Trump-Russia Links And Piggy Banks Of The Wealthiest 1 Percent:

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November 7, 2017 in Political News, Shuyi Oei, Tax, Think Tank Reports | Permalink | Comments (1)