|Accountants and clients often request assistance and guidance regarding how, or if, to respond when the IRS sends a notification that a current or former worker has submitted a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Form SS-8 may be filed by either a worker/independent contractor or a business. It seeks clarification as to whether a worker (or class of workers) is an independent contractor or an employee. A worker generally submits the request to determine that they are an employee rather than an independent contractor, and answers the Form’s questions in a manner that will elicit that response from the IRS. If the business submits the request, it is generally for confirmation that one or several categories of workers that are classified as independent contractors under the common law rules are properly classified as such for purposes of federal income tax withholding and employment taxes.
Form SS-8 is most often submitted by a disgruntled former worker who was working as an independent contractor and was issued a Form 1099-MISC for his or her compensation. Workers contract with businesses to provide services as independent contractors in a broad spectrum of professions, trades, and industries (see sidebar). In many instances, the worker’s contract to provide services will have been can celled because of poor performance and his or her services terminated by the business at the request of a third party for whom services were being provided. In most situations there will be a written agreement between the worker and the business regarding the scope of the services to be provided by independent contractors.
After the IRS receives a Form SS-8 it will acknowledge receipt and send a blank Form SS -8 to the business advising it that a worker, or former worker, has submitted the form. It will request that the business complete the form and return it to the assigned IRS technician. The business will be told the worker’s identity. In accordance with the Form SS-8 instructions, the technician will review the responses on the Form SS-8, apply the law, and render a decision. The IRS will then issue a written determination to the business and send a copy to the worker. The question that now arises is what should the business do?
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This article is reprinted with permission by Practical Tax Strategies. This article originally appeared in Practical Tax Strategies, March 2015.
DISCLAIMER: This article is for general information purposes only. It does not constitute legal or tax advice, and may not be used and relied upon as a substitute for legal or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or tax practitioner licensed to practice in the jurisdiction where that advice is sought.