As the 'gig economy' continues to expand in the US, the Internal Revenue Service (IRS) is lagging behind in how it deals with it, according to a new report from the Treasury Inspector General of Tax Administration (TIGTA).
According to Forbes, more than a third of the country’s workers, or about 57 million people, are currently participating in the gig economy, and the number is only expected to grow.
Gig economy participants are usually treated as independent contractors rather than employees, but each situation is different. The tax stakes are high because employers are required to pay a share of payroll taxes for each worker, while providing them with the same fringe benefits offered to other employees. The gig economy also raises other tax issues such as what business deductions may be claimed by taxpayers who act as gig workers.
Although the IRS has created a Sharing Economy Tax Center web page to provide them with assistance and resources, GPA Practice Advisor claims that it does not have all the answers. Misclassification of workers continues to pose problems for both employers and gig workers alike.
In its new report, TIGTA found that the SS-8 Program to determine worker status for federal employment tax and income tax withholding purposes does not track Form SS-8 submissions from gig workers. In fact, it identified 15 cases that were mishandled due to a lack of guidance and as a result were held without action for an average of 524 days. The SS-8 Program then mistakenly determined that no decision could be made on the cases because the businesses in question were afforded Section 530 relief, which prevents the IRS from addressing past and future worker misclassifications.
TIGTA also revealed that the Employment Tax Examination function did not receive any referrals for potential examination from the SS-8 Program between October 2014 and April 2018. Furthermore, it said that the Program failed to process SS-8 requests quickly enough to be useful to workers when asking for assistance.
As a result, TIGTA recommended that the IRS take the following action:
- Create guidance and provide training to deal with gig economy Form SS-8 requests;
- Evaluate which function would be best to identify cases for referral;
- Assess whether employers are complying with the appropriate determinations, and also consider Program changes and referrals to increase business compliance with worker classification determinations;
- Weigh up the process used in making worker classification determinations and opinions, and make changes where necessary to improve the process;
- Work with the IRS to amend Section 530, so that non-compliance with the law can be addressed.
The IRS, which has accepted all of TIGTA’s recommendations, is now planning to implement them.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
OTHER ARTICLES THAT MAY INTEREST YOU
Pressure mounts on UK government to regulate gig economy
Proposals for UK gig workers to pay income tax would 'cause confusion'
Pimlico Plumbers: Latest UK gig economy ruling to grant employment rights
As the 'gig economy' continues to expand in the US, the Internal Revenue Service (IRS) is lagging behind in how it deals with it, according to a new report from the Treasury Inspector General of Tax Administration (TIGTA).
According to Forbes, more than a third of the country’s workers, or about 57 million people, are currently participating in the gig economy, and the number is only expected to grow.
Gig economy participants are usually treated as independent contractors rather than employees, but each situation is different. The tax stakes are high because employers are required to pay a share of payroll taxes for each worker, while providing them with the same fringe benefits offered to other employees. The gig economy also raises other tax issues such as what business deductions may be claimed by taxpayers who act as gig workers.
Although the IRS has created a Sharing Economy Tax Center web page to provide them with assistance and resources, GPA Practice Advisor claims that it does not have all the answers. Misclassification of workers continues to pose problems for both employers and gig workers alike.
In its new report, TIGTA found that the SS-8 Program to determine worker status for federal employment tax and income tax withholding purposes does not track Form SS-8 submissions from gig workers. In fact, it identified 15 cases that were mishandled due to a lack of guidance and as a result were held without action for an average of 524 days. The SS-8 Program then mistakenly determined that no decision could be made on the cases because the businesses in question were afforded Section 530 relief, which prevents the IRS from addressing past and future worker misclassifications.
TIGTA also revealed that the Employment Tax Examination function did not receive any referrals for potential examination from the SS-8 Program between October 2014 and April 2018. Furthermore, it said that the Program failed to process SS-8 requests quickly enough to be useful to workers when asking for assistance.
As a result, TIGTA recommended that the IRS take the following action:
- Create guidance and provide training to deal with gig economy Form SS-8 requests;
- Evaluate which function would be best to identify cases for referral;
- Assess whether employers are complying with the appropriate determinations, and also consider Program changes and referrals to increase business compliance with worker classification determinations;
- Weigh up the process used in making worker classification determinations and opinions, and make changes where necessary to improve the process;
- Work with the IRS to amend Section 530, so that non-compliance with the law can be addressed.
The IRS, which has accepted all of TIGTA’s recommendations, is now planning to implement them.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
OTHER ARTICLES THAT MAY INTEREST YOU
Pressure mounts on UK government to regulate gig economy
Proposals for UK gig workers to pay income tax would 'cause confusion'
Pimlico Plumbers: Latest UK gig economy ruling to grant employment rights
