A lot of attention has been paid to the tax increases that are part of the Democratic-backed Inflation Reduction Act that’s making its way through Congress. And while these increases are concerning to both businesses and taxpayers, there’s another rule coming from the Biden administration that will have an even bigger impact on costs for millions of small businesses: a looming change in worker classification rules.
The new rules will result in changing the status of countless “independent contractors” to employees. So why is that such a big deal?
Small businesses rely on independent contractors to perform ad-hoc and infrequent tasks that usually do not require the attention of full-time employees. Often called “1099 workers” (thanks to the tax form that needs to be filed with the IRS to report payments over $600), these freelancers (or “gig workers”) are stand-alone entrepreneurs who oftentimes serve multiple customers.
They’re truck drivers, software developers, project managers, construction workers, content producers, health care professionals, counsellors and trainers. They belong to professional organizations that support freelancers. Along with millions of others, they get projects and side gigs through platforms such as Fiverr, Craigslist, UpWork and Freelancer.com. Most of these entrepreneurs operate independently as small business owners themselves and earn their entire livelihoods this way. Others enjoy the extra income these freelancing opportunities provide.
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