That new section singled out a select group of Independent Information Technology (IT) Professionals for tax punishment. At the time, Michael O’Connor, was an Independent IT Professional working in New York City.

Without any public debate, Congress, with the support of special interest groups, fundamentally altered the business landscape for hundreds of thousands (soon millions) of Independent Professionals.

Believing that IT Independent’s were unfairly singled out, Michael set out on a mission to neutralize the negative effects of Section 1706.

His solution was to create a unique and revolutionary environment that would return to Independent Professionals the freedom and flexibility Congress and special interest groups stripped away. It took many years to convince a bewildered public and business community that a company could survive and prosper with a customer base consisting solely of its own employees. But eventually the concept caught on. His success story became the model that is copied by all other umbrella companies in the United States today.

Essentially the consultant had to be employed and controlled by another company. Moreover, the "Employer of Record" was responsible for withholding and paying all payroll taxes for the consultant.

Section 1706 singled out contractors working through third-party "Employer’s of Record". The most common of these were technical brokers, technical agencies or staffing companies. Section 1706 also excluded them from statutory protection previously granted to all independent contractors under safe harbor provisions enacted in Section 530 of the Revenue Act of 1978.

This exception, known as subsection 530(d), allows the IRS to reclassify Independent Contractors as employees of the hiring client or the third party "Employer of Record". This held true even if the independent contractor was working through their own single party corporation or paid on a 1099 basis. If they were reclassified the hiring company was liable for paying all the contractors back taxes (even if the contractor had already paid them), plus fines. In addition the "new employees" were also entitled to all company benefits (pension, medical, stock options, etc.) retroactive to their contract start date. Since its enactment the IRS has collected hundreds of millions of dollars through enforcement of Section 1706.

The Independent Professionals were dealt a crippling triple blow. First, many were forced to join staffing firms at reduced billing rates as temporary W-2 employees (with little or no benefits). Second, as W-2 employees they lost the ability to deduct most business expenses and also had their maximum contribution to retirement programs reduced or eliminated, not to mention losing control of their investments even if a modest 401(K) was established. Third, their entire gross billing rate was taxable income. For the Independent Professional it was a lose-lose-lose situation.

Even though individuals could still legitimately work for clients on a direct basis without risking reclassification as an employee of the client, this avenue was not attractive to the client. Most clients preferred to err on the side of caution and limited the instances of paying consultants on a 1099 basis. Clients also began to reduce payments to small corporations, especially Sub-Chapter S corporations. Since a large percentage of IT professionals find new contracts through third party technical brokers the new legislation had a far reaching impact.

The impact was immediate and profound. Within the period of one year it was estimated that over 50,000 independent computer professionals working in the New York Metropolitan area alone had their contracts cancelled, or were forced to convert to employees of Staffing Agencies.

How did this happen? It will surprise few reading this text that it was a unique combination of power, money, special interest groups and politics juxtaposed to the unorganized and solitary computer techies.

As the company grew they were able to develop a suite of custom software applications to meet the unusual administrative requirements of a company with hundreds of individual profit centers. The company was also able to offer significant savings on group health and income disability insurance policies coupled with sophisticated pension plans. The company was the first in the country to offer self-directing pension and matching 401(k) retirement programs with immediate vesting for all members/employees.

In 1995 Michael merged Software Resources of NJ with a network integration company based in Virginia called The Netplex Group. Together they completed a reverse merger with Complink Corporation and were traded on Nasdaq. About 2 years after the merger was complete it became clear to Michael that expanding the verity and scope of services to his membership would be increasingly difficult. The other divisions in the Netplex Group operated under the more familiar corporate structure. Benefits and perks offered in his division’s (SRNJ) increased the labor cost in the other divisions because they had to offer similar benefits to their employees to avoid discrimination issues.

In late 1997 Michael initiated an organized transition from Software Resources of NJ to his new company Independent Professional Services Inc. (IPS). After his departure, The Netplex Group changed the name of Software Resources of New Jersey to My Biz Office.

Freed from the constraints associated with large multi-disciplined organizations he set out to recreate the free-spirited dynamic company required to serve the rapidly changing needs of the independent professional. That sprit is embodied in IPS. Over the next year and half all of the original management team of Software Resources and most of the Personal Assistants would join and invest in IPS.