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Here's a question I came across today, When Did Hiring Independent Contractors Become Illegal? Anita Campbell of Small Business Trends discusses the current Congressional hearings (April 2008) that appear to criminalize small business owners for using Independent Contractors (1099) rather than employees, making the assumption that the only reason for this relationship is to avoid or reduce tax responsibilities, thus operating in a "shadowy" Underground economy.

Anita reports: According to the statement by Senator John Kerry, Chair of the Senate Committee on Small Business, the definition of underground economy that the Committee is looking at includes small businesses that may misclassify independent contractors instead of employees. Senator Kerry’s statement notes: “Too many workers are being misclassified as independent contractors — an arrangement in which the employer is not responsible for withholding of income or paying employment taxes. Employers who erroneously misclassify their workers stand to save as much as 30 percent of their payroll costs. This puts law abiding employers at a disadvantage.”

I don’t know about you, but I’m troubled by this expansion of the definition of underground economy to include misclassification of independent contractors/employees.

What do you think?

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