Employee misclassification is int the spotlight as a way to reduce the tax gap.

Employee misclassification of workers as independent contractors is in the spotlight as the Government Accountability Office (GAO) and Congressional Research  Service (CRS) have released reports and recommendations on the issue.  IRS reportedly is embarking on an employment tax audit of selected employers nationwide, and a recently introduced bill would revammp so-called "Section 530" relief.

 The CRS recently summarized the employee-vs-independent contractor issue and reported that the last IRS estimate ws that 15% of employers misclassified 3.4 million workers as independent contractors rather than as employees causing an estimated total loss of $1.6 billion in taxes.  

Representative James McDermott (D-WA) has introduced legislation that would make it more difficult for employers to receive protection from a potentially large employment tax assessment after incorrectly classifying a worker as an independent contractor.  The legislation, if passed, would also increase information reporting penalties.