PayrollSmall BusinessTaxes

Strippers draw attention to changing tax law

Who would have guessed that strippers would be on the cutting edge of changing tax law?

The laws that distinguish between contractors and employees are changing in some states. California’s strippers are in the spotlight. Yesterday strippers protested the new state law in San Diego. They like the independence of being classified as contractors yet they (and their employers) don’t pay the taxes associated with employees. New California state law classifies them as employees and assesses taxes. Federal tax law follows the state determination, Additional proposed state law will crack down on and prosecute employers who continue to ignore the law.

The strippers’ tax problems do not end there. Changes in federal tax law brought in by the Tax Cuts and Jobs Act mean that they can no longer deduct the costs associated with their work. As a practical matter, I have little doubt that the collective tax law changes cut into the net take home pay of strippers. There are trade-offs, however. Strippers working as independent contractors do not have access to any of the protections of employees. These include full social security, disability coverage, better access to health insurance coverage, paid leave, employer participation in formalized retirement plans and more.

I found the “keep your laws off my body” protest sign amusing as a twist on a larger argument  but it is clear that the protesting strippers are on the wrong side of the issue this time. They will lose this battle. Strippers will be classified as employees and those individuals and employers who do not comply with this standard will wind up with delinquent tax bills and expensive penalties and associated costs.

I wrote this blog post to draw attention to the serious and significant employee vs. contractor issues facing every small business and independent contractor. Other resources are available on this web site and through tax agencies. It is important to review these issues with your accountant, design and manage your hiring processes accordingly, and recognize and deal with any legal issues that put you on the wrong side of tax authorities.

Make sure that your business is making safe use of employee vs. independent contractor laws. I am happy to offer a review to come up with tax-saving ideas and proposals to reduce the risk in this area.

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