Sponsors (8)
The bill strengthens payroll-tax enforcement and Social Security funding by treating large firms’ contractor payments as wages, but shifts significant tax costs and compliance burdens onto firms and contractors, risking lower contractor take-home pay and reduced contracting opportunities.
Workers’ payments from very large firms will be treated as wages for payroll-tax purposes, reducing misclassification and increasing payroll-tax collections that improve tax fairness and revenue.
Independent contractors who are covered will have those payments counted as wages, which can raise reported earnings used to calculate Social Security benefits.
An aggregation rule prevents large firms from avoiding the threshold by splitting into related entities, improving enforceability and overall compliance with payroll-tax rules.
Both employers and contractors on covered payments effectively face doubled payroll taxes (employer + employee), substantially increasing labor costs for firms and reducing contractors’ take-home pay.
Firms may respond to higher labor costs by cutting contractor pay, reducing contract opportunities, or reclassifying work, which would harm gig and contract workers’ incomes.
New withholding rules, aggregation tests, and reporting changes create additional compliance and administrative burdens for covered firms and for the IRS.
Based on analysis of 2 sections of legislative text.
Treats payments from very large firms to many contractors as wages, doubles employer and employee FICA on those payments, and counts them as Social Security earnings.
Official title: To amend the Internal Revenue Code of 1986 to require payroll tax withholding on independent contractors of certain large businesses.
Introduced June 2, 2026 by Bonnie Watson Coleman · Last progress June 2, 2026
Treats payments from very large firms to independent contractors as wages for employment-tax purposes, doubles both employer and employee FICA rates on those payments, and counts the resulting amounts as Social Security earnings. The rule applies only to firms with at least $100 million in annual gross receipts that contract with 10,000 or more nonemployee service providers, aggregates related entities for the threshold, and takes effect for payments made after December 31, 2026.