Department of Labor issues Final Rule on Independent Contractors

  In January 2021, the Department of Labor (Department) announced a final rule clarifying the standard for employee versus independent contractor under the Fair Labor Standards Act (FLSA). The effective date of the final rule is March 8, 2021.In the final rule, the Department:

• Reaffirms an “economic reality” test to determine whether an individual is in business for him or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee).
• Identifies and explains two “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself:
  • The nature and degree of control over the work.
  • The worker’s opportunity for profit or loss based on initiative and/or investment.
• Identifies three other factors that may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification. The factors are:
  • The amount of skill required for the work.
  • The degree of permanence of the working relationship between the worker and the potential employer.
  • Whether the work is part of an integrated unit of production.
• The actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
• Provides six fact-specific examples applying the factors.

The Final Rule can be accessed at https://www.federalregister.gov/documents/2021/01/07/2020-29274/independent-contractor-status-under-the-fair-labor-standards-act.  A word of caution - the Biden administration has signaled they are not necessarily in favor of the final rule as currently written and may seek to delay its effective date. 

 Prior to January 2021, only individual taxpayers who were victims of Identity Theft ere provided with a PIN for use in filing their future returns.  Returns submitted without this PIN will be rejected by the IRS, helping to ensure a fraudulent return is not submitted in the taxpayer's name.  These PINS can be obtained on the IRS website at IRS.gov after completing an identify verification process

 The CARES Act created a new above the line charitable donation deduction for taxpayers who don't itemize in order to provide some added relief for charitable organizations.  For 2020 only, individuals who do not itemize deductions, but instead take the standard deduction, on their 2020 1040 will be eligible to take up to a $300 charitable donation deduction.  Donations must be made in cash (non-cash donations are not eligible) to a public charity who is not a supporting organization or a donor advised fund.  Amounts in excess of $300 do not carry over to the following year.  As the year comes to a close, which often times corresponds to the the highest giving months of the year, charitable organizations may want to ensure their giving message includes reference to this new deduction opportunity. 

New IRS Tax Withholding Estimator

Tell your employees about the new IRS Tax Withholding Estimator. The new taxpayer-friendly tool on IRS.gov helps workers tailor the amount of income tax their employer should withhold from their paychecks and avoid unexpected results at tax time. The Estimator allows filers to target a tax due amount close to zero or a refund around $500.

In March, 2019, the  7th Circuit Court once again upheld the Housing Allowance or Parsonage Allowance as constitutional, reversing an earlier district court decision to the contrary.  While this ruling only affects those in the 7th Circuit, who can now breathe a sigh of relief, it seems this might be an issue for the entire country to watch.  The Freedom From Religion Foundation who triggered this court battle may not be done challenging the constitutionality of the Internal Revenue Code section governing housing allowance and it is yet to be seen whether they will take this to the Supreme Court.  We will continue to monitor developments in this area and advise our clergy clients of any new developments.