Inflation Nation Hits the IRS

President Joe Biden signed into law the “Inflation Reduction Act”, which at its face value, is tasked with improving healthcare and mitigating climate change. But in the Swamp, not much is as it appears on the surface. The law also intends to provide significant additional funding for the IRS, boosting the headcount by 87,000 new IRS agents, intending to yield billions of dollars in better tax enforcement. Although Treasury Secretary Janet Yellen says she plans to deliberately focus on large corporations and high-net-worth individuals, Independent Women’s Forum Senior Fellow Gabriella Hoffman thinks otherwise. For Hoffman, beefing up additional agents will put more burden on independent workers and small businesses. The Independent Women's Forum shares that even self-employed individuals can face more intense scrutiny from the IRS than W-2 employees. In short, the IRS intends to regulate the independent worker's space.

Employment law expert and Partner, Michael Best & Friedrich LLP, Eric Rumbaugh , agrees. “We have not heard any indication that small businesses or independent contractors are specifically targeted here, but we can expect additional enforcement across the board.”

With these thoughts in mind, the better question for individual contractors and small business owners would be “How can I hedge against such risks?” One of the best pieces of advice is to organize business records. Small businesses and freelancers must maintain consistent categories of records. If so, they can also leverage and utilize a tax professional and transmit a full tax return. Also, double-check for any calculation errors, or excess deductions, and file in a timely manner. If you disagree with the assessment of the auditor, you can always appeal any findings or even request a meeting with the auditor’s supervisor.

With workers' misclassification and now with the upcoming pressure from the IRS, it is not only important for self-employed, freelancers, gig workers, or any person working in the independent space, but enterprises who tap independent professionals should also be familiar with compliance requirements. It is now even more critical that compliance should be ingrained in the operations of both enterprises and independent professionals.

Trending Topics: Gig Work on the Rise, Portable Benefits & More

Here's what else is going on around the #futureofwork space this week.

●     Global Compliance Vendor, Sovos , announced that there was a 33% increase in 1099-K forms from 2020 to 2021, indicating a rapid increase in gig and on-demand work. This further encapsulates the effect of the upcoming Inflation Reduction Act on a broader base of freelancers and gig workers.

●     In the face of the evolving gig economy and the surmounting pressure of worker misclassification compliance, an NYSBA article proposes a way where both gig companies and gig workers can win. Trish Dessai, a J.D. candidate at American University Washington College of Law, features universal portable benefits— where the benefits will be attached to the worker and can be taken from job to job. The article cites the MBO Partners’ State of Independence report to support the need for such benefits given the rapidly increasing number of gig workers.

●     Despite the increasing number of job listings in the labor market, people still prefer doing on-demand work. The reasons why the gig economy remains strong are its inherent flexibility that could improve work-life balance and how it can supplement full-time jobs to earn more amidst a high inflationary environment.

●     AT&T underestimated the power of workers when they issued a mandate about their “return to office” working arrangements. A Change.Org petition entitled “Make ‘Work from Home’ a Permanent Option for AT&T Employees” already amassed 6,200 signatures and obtained hundreds of testimonials from employees on how a remote work arrangement was able to improve their lives.

●     Speaking of remote work arrangements, Tracy Brower, PhD , a Forbes Contributor, assesses whether remote work could survive as the economy contracts and more companies announce layoffs.

Should you have any questions, we’re always here for you. Share your thoughts with us at MBO Partners on Twitter, Facebook, Instagram, and LinkedIn, and we’ll see you again next week!