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San Jose business law attorneyPerhaps no other piece of California legislation has caused as much of a stir in recent years as Assembly Bill 5 (AB5). The bill was signed into law in September 2019 and went into effect on January 1, 2020. AB5, nicknamed the “gig worker bill,” significantly limits when employers can classify workers as independent contractors. Many companies that rely heavily on independent contractors are concerned about how the legislation will affect their ability to stay in business. The trucking industry has been one of the most vocal critics of the bill, and some recent developments may affect how these companies will operate going forward.

California Trucking Association’s Lawsuit Regarding AB5

Assembly Bill 5 instituted an “ABC test” for determining whether a worker can be classified as an independent contractor. According to AB5, all workers must be considered employees unless the following three criteria are met:

  1. The worker is able to carry out services free from the direct control of the company.
  2. His or her work tasks are not part of the company’s usual course of business.
  3. He or she is performing work that is of the same nature as that which he or she is ordinarily engaged in.

Many trucking industry employers and workers are especially concerned with part B of this test. Along with two owner-operators, the California Trucking Association (CTA) filed a lawsuit to fight the new restrictions regarding worker classification. The association argued that the legislation will threaten the livelihood of over 70,000 truckers who are currently classified as independent contractors. The CTA further contends that the new restrictions implemented by AB5 conflict with the Federal Aviation Administration Authorization Act of 1994 and the Federal Motor Carrier Safety Act.

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San Jose business tax form lawyerAn IRS deadline for business owners is fast approaching. January 31, 2019 is the date by which employers and businesses must submit wage statement forms and independent contractor forms. 

These requirements were outlined in the Protecting Americans from Tax Hikes (PATH) Act of 2015, which made it compulsory for businesses to submit duplicates of Form W-2 (Wage and Tax Statement) and Form W-3 (Transmittal of Wage and Tax Statements) to the Social Security Administration by the end of January of each year. In addition, certain Forms 1099-MISC (Miscellaneous Income) must be filed by this date with the IRS to report payments made to independent contractors. 

There are penalties for businesses that do not comply with this deadline. 

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employee classification, independent contractors, San Jose business tax lawyer, gig economy, payroll taxesIn today’s economy, millions of people across the United States act as freelance workers, either as a primary job or as a way to supplement income. The digital tools available to companies and workers in the gig economy allow many people to earn an income by transporting passengers, renting property to travelers, or performing a variety of other tasks. 

While many people and companies have benefited from the sharing economy, the increased prevalence of this type of labor has raised a variety of legal issues as employees seek to receive fair compensation and government entities ensure that taxes are applied correctly.

A recent ruling by the California Supreme Court will have a significant impact on gig economy workers and employers, affecting issues such as employee classification and taxes.

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San Jose tax lawyer, gig economy, tax reform, tax cuts, independent contractorsFollowing the passage of the Tax Cuts and Jobs Act of 2017, financial experts across the United States have been working to understand the full impact of this historic legislation. Much of the discussion surrounding the tax reform bill has focused on how its changes to tax law will affect large corporations (which have seen a reduction in the corporate tax rate from 35 percent to 21 percent). However, the growing portion of the country’s population that participates in the gig economy should also understand how it will be affected.

Taxes for Independent Contractors

Surveys have shown that there are 57 million people in the United States who currently perform freelance work either full-time or part-time, including people who earn an income in the gig economy (also known as the sharing economy), such as drivers for Uber or Lyft or people who rent their property through Airbnb. As independent contractors, these freelancers may be able to take advantage of new tax deductions.

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San Jose tax attorney, estimated taxesIf you are an independent contractor, you may be required to pay your taxes several times throughout the year. This is called an estimated tax.

This requirement comes as a surprise to many freelancers and contract employees. If not properly handled, it can create undue stress as well as expose the taxpayer to IRS penalties.

It is important to not get bogged down in the complexity of your tax situation as an independent contractor. Instead, you should reach out to a professional, such as a tax attorney, who can advise you on how you need to comply.

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