Sep
03
2009
Independent Contractor Status
The status of financial professionals as independent contractors is in jeopardy given recent legislation which proposes blanket removal of a safe-harbor provision that has been in place since 1978. On July 30, Rep. Jim McDermott (D-WA 7th) introduced H.R. 3408, the Taxpayer Responsibility, Accountability and Consistency Act of 2009. The bill’s core provisions make it more difficult for employers to classify workers as independent contractors.
While the proposal is intended to address worker classification problems in other industries, it would have serious unintended negative consequences for independent Broker/Dealers, independent financial advisors, and the clients they serve.
Negative impact from the passage of this legislation and repeal of the safe harbor provisions would be significant:
• Independent financial advisors would be exposed to IRS scrutiny of worker classification status
- And could be subject to back taxes, penalties, and interest
• The IRS could force independent financial advisors to become employees of their Broker/Dealer
- This would undermine true independence and mitigate their ability to best serve their clients
- Ownership of clients and the practice could move to the broker dealer
Please call or write your Representatives and urge them not to cosponsor H.R. 3408.
