Death and Taxes

by Reggie Oldak, Senior Counsel,
National Women's Law Center

Last Thursday, a man deliberately crashed his private plane into an Austin, Texas building that houses the Internal Revenue Service. We are appalled at this act of violence that resulted in at least two deaths and seriously injured others. 

But the tragedy does call attention to important (if arcane) tax issues. The pilot’s motive may have been a grievance about whether he was an employee or an independent contractor for employment tax purposes. The issue is complicated, and a full analysis involves the Internal Revenue Code, 20 common-law factors, years of court cases and administrative rulings, section 530 of the Revenue Act of 1978, and section 1706 of the 1986 Tax Reform Act. 

This pilot, a computer software engineer, apparently wanted to be treated as an independent contractor because that would have provided him with more work opportunities. For most women, it’s the other way around. 

When employees are misclassified as independent contractors, they are denied the benefit of workplace protection laws, unemployment insurance coverage, and employer contributions toward Social Security and Medicare. Women are often disproportionately represented in fields that are subject to misclassification, such as child care, home health care, grocery stores, and janitorial jobs. 

Misclassification of employees as independent contractors also has a budgetary impact, reducing employment tax revenue, including Social Security, Medicare, and Federal Unemployment Tax Act receipts. President Obama’s budget for FY 2011 proposes a joint Treasury-Department of Labor initiative to protect workers by ensuring proper classification. The budget also calls for legislation that would enhance the ability of the IRS to reclassify workers and make misclassification a violation of the Fair Labor Standards Act. 

It doesn’t seem likely that the President’s budget proposals would have made a difference to the pilot, Andrew Stack. But they hold promise for women who need workplace benefits and protections.