The Tax Cuts and Jobs Act of 2017 and the Gig Economy: Why the Employee vs. Contractor Debate Matters More than Ever

Abstract

The issue of whether workers are independent contractors or employees has become even more relevant with recently enacted and proposed legislation and court cases in many jurisdictions seeking to impose employee status on many Gig economy workforce participants, such as ride-share drivers. This article emphasizes that the U.S. income tax rules, especially after tax reform effective in 2018, makes employee status extremely tax-inefficient for these workers. This article explains the relevant tax law changes and provides various examples of typical settings to confirm that workers with even small relative work expenses are often better off as contractors from a tax point of view.