There are certain issues that perpetually perplex the U.S. Congress. Some of them are large, headline-grabbing issues, like access to affordable health care and ending the conflict in Iraq. Others are much smaller but no less vexing. One such issue is the question of classification of independent contractors. You wouldn’t think such a seemingly simple thing would cause problems, would you? The perplexing part that no one seems to want to tackle for more than half an hour per session of Congress is figuring out a clear and rational set of guidelines that defines what, exactly, an independent contractor is and is not, for tax purposes. That is because sometimes independent contractors are a bit like email spam. Tough to define with any precision but you know it when you see it.

The latest attempt to address this problem is the Taxpayer Responsibility, Accountability, and Consistency Act of 2009 (H.R. 3408), introduced at the end of July by Congressman Jim McDermott (D-WA). Fro all its good intentions, this bill is bad news for microbusinesses. It increases information reporting requirements for tax purposes by requiring businesses to file Form 1099 for all service vendors, including corporations. It also prohibits businesses from considering workers to be independent contractors unless they have already had an IRS determination to that effect, and the business hasn’t treated any other worker holding a “substantially similar position” as an employee for the past thirty-one years or so. If passed, this would appear to have the immediate effect of making almost all independent contractors into employees for payroll tax purposes, because it seems unlikely that most businesses will be able to satisfy both of those conditions. We can expect that the National Association for the Self-Employed will not take this one lying down.