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A recent congressional inquiry into whether Blackwater USA properly classified its security guards in Iraq and Afghanistan as independent contractors rather than employees highlights the often complicated application of provisions for determining this status. In its defense, Blackwater invoked the safe-harbor provisions of section 530 of the Revenue Act of 1978, among other arguments. Advisers to businesses dealing with this common dilemma may want to make sure they know the safe-harbor rules, which are not written into the Internal Revenue Code but may be found in source notes for IRC section 3401.

Other contractor versus employee considerations ...