Is there a future for temporary help?

For small companies or seasonal businesses, the hiring of full-time employees can make poor business sense. When extra personnel is needed, many firms rely on a temporary or part-time labor force. While American business has embraced the value of the temporary worker, the Internal Revenue Service continues to develop ways to eradicate these positions.

The changing face of the American worker has made the impact of this effort even more dramatic. Those who have been laid off and unable to obtain part-time jobs, families who require a part-time income to stay afloat, and entrepreneurs struggling to get a start are affected as well. The IRS wants these positions eliminated and those who hold themselves out as independent contractors declared to be employees.

"Social Security taxes, Federal withholding taxes, and unemployment insurance are three reasons why the Federal government wants to see all workers treated as employees instead of as independent contractors," explains Barry H. Frank, a tax attorney with the Philadelphia-based law firm of Mesirov Gelman Jaffe Cramer & Jamieson. "Every year, the Internal Revenue Service claims that it loses more than $20,000,000,000 in payroll taxes from companies that utilize the services of independent workers instead of adding employees to their payroll."

The IRS and the Treasury Department are cooperating to change the status of as many temporary and part-time workers and independent contractors as possible. They already have reclassified millions, from independent, part-time, or temporary status to that of an employee. The IRS uses various checklists when classifying them. The most frequently utilized is a 20-point one that provides the basis for distinguishing between an independent contractor and an employee.

Jeffrey Cooper, a litigator with...