Publication 963 (Rev. October 1997) - Uncle Fed's Tax*Board

More documents

Recommendations

Info

Determining Worker Status FORM SS-8 NOTES Occasionally a State or local entity will be unable to determine whether a worker is an employee or whether the worker is self-employed and should be treated as an independent contractor. Many individuals who have personal service contracts with State or local entities may be employees rather than independent contractors. The existence of a contract does not mean that the individual performing the service is not an employee. It is important to the worker that the employment status be determined as soon as possible so that the earnings can be properly reported. Consider the common law factors. If no clear resolution is possible, consider filing a Form SS-8 (Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding) with the IRS for a determination. A Form SS-8 is used to gather information to determine whether a worker is an employee for Federal employment taxes. All pertinent facts relating to the individual’s work arrangement should be obtained and submitted to the IRS on a Form SS-8. A Form SS-8 may be submitted by the State or local entity or the worker. If a contract has been executed between the worker and the entity, a copy of the contract should be furnished with the Form SS-8. When a Form SS-8 is submitted to the IRS, all the facts are analyzed and the determination of a worker’s status is presented to the employer in the form of a Determination on Letter Ruling. Direct Forms SS-8 to the local district director of the IRS (Revenue Procedure 97-1). Several problems arise for a worker when incorrectly treated as an independent contractor. To begin with, the worker would probably pay more taxes (i.e., SECA taxes) than if the worker was being correctly treated as an employee. As an employee, only the employee’s portion of the Social Security and Medicare taxes are withheld and paid from the employees wages. As an independent contractor the worker is not eligible for any unemployment benefits or other benefit plans that the worker would have as an employee. Also, as an independent contractor, the worker may also have to pay estimated tax payments each quarter. A worker who is being incorrectly treated as an independent contractor often does not realize this responsibility and the potential for tax problems is created in the form of penalties and interest for underpayment of taxes. INTEREST AND PENALTIES Interest Interest is assessed on any taxes due and unpaid. The interest is in addition to any penalties that may be imposed. Specific provisions allow an employer who has made an under collection or underpayment of the correct amount of FICA taxes or income tax withholding to make an interest free correction (IRC section 6205(a)(1)). The following two provisions must be met: 1. Correction of the error must be made in the period in which the error was ascertained; and 2. Payment of the tax must be made no later than the due date of a like return for the return period in which the error was ascertained (e.g., quarter ended March 31, is due April 30). In addition, additional tax due as a result of an IRS examination or ruling may qualify for an interest-free adjustment. Interest-free treatment is also available for adjustments made on delinquent and substitutes for returns (IRC section 3509). Federal-State Reference Guide (1997 Edition) 3-21
Determining Worker Status NOTES Penalties Employment Tax Penalties. The following penalties describe only the most commonly assessed penalties as they relate to employment tax. There are penalties for filing a return late and paying or depositing taxes late unless there is reasonable cause. IRC: Section 6651(a)(1) Section 6651(a)(2) Section 6651(c) Section 6652 Section 6656 Section 6662 The penalty is assessed for: failure to file a tax return (failure to timely file); failure to pay tax shown on the return (failure to timely pay) (The penalty is imposed if the amount of tax shown on the return is not paid on or before the prescribed date.); situations where both the failure to timely file and failure to timely pay apply; failure to file certain information returns and registration statements, etc. (assessed when there is a failure to file certain information returns not covered under other sections); failure to make deposit of taxes (when there is failure by any person to deposit in a government depository) on the date prescribed any amount of taxes which is imposed; underpayment of employment taxes due to disregard of the rules and regulations (accuracy related). Information Reporting Penalties. The following penalties describe only the most commonly assessed penalties as they relate to information reporting: Section 6721 Section 6722 Section 6723 failure to file correct information returns on or before the required filing date or where there is failure to include all informationrequiredtobeshownonthereturn(orwhere there is incorrect information shown); failure to furnish correct payee statements on or before the date prescribed to the person to whom such statement is required to be furnished, or a failure to include all of the information required to be shown on the payee statement or where the information is incorrect; failure to comply with other specific information reporting requirements on or before the prescribed time (usually related to failure to furnish a TIN). 3-22 Federal-State Reference Guide (1997 Edition)
Page 1 and 2: FEDERAL-STATE REFERENCE GUIDE Socia
Page 3 and 4: 4. Social Security Coverage Social
Page 5 and 6: 10. Public Employers State Governme
Page 8 and 9: Preface Objectives of this book Th
Page 10 and 11: Introduction Introduction Social Se
Page 12 and 13: Introduction Who Is Responsible for
Page 14 and 15: 2 Frequently Asked Questions
Page 16 and 17: Commonly Asked Questions Questions
Page 18 and 19: Commonly Asked Questions 10. Where
Page 20 and 21: Commonly Asked Questions SSA 21. My
Page 22 and 23: Determining Worker Status 3
Page 24 and 25: Determining Worker Status Introduct
Page 26 and 27: Determining Worker Status The gover
Page 28 and 29: Determining Worker Status The deter
Page 30 and 31: Determining Worker Status Audits co
Page 32 and 33: Determining Worker Status COMMON LA
Page 34 and 35: Determining Worker Status Presence
Page 36 and 37: Determining Worker Status ♦ ♦
Page 38 and 39: Determining Worker Status In practi
Page 40 and 41: Determining Worker Status If statut
Page 44 and 45: Determining Worker Status Penalty R
Page 46 and 47: Social Security Coverage 4
Page 48 and 49: Social Security Coverage Social Sec
Page 50 and 51: Social Security Coverage Note NOTES
Page 52 and 53: Social Security Coverage Chronology
Page 54 and 55: Social Security Coverage The Social
Page 56 and 57: Social Security Coverage Note: Serv
Page 58 and 59: Social Security Coverage Positions
Page 60 and 61: Social Security Coverage Questions
Page 62 and 63: 5 Medicare/Hospital Insurance Cover
Page 64 and 65: Medicare/Hospital Insurance Medicar
Page 66 and 67: Medicare/Hospital Insurance Employe
Page 68 and 69: Medicare/Hospital Insurance IRS 2.
Page 70 and 71: Public Retirement Systems 6
Page 72 and 73: Public Retirement Systems Definitio
Page 74 and 75: Public Retirement Systems meet this
Page 76 and 77: Public Retirement Systems participa
Page 78 and 79: Public Retirement Systems Individua
Page 80 and 81: Public Retirement Systems IRS 3. Wh
Page 82 and 83: 7 The Role of the State Social Secu
Page 84 and 85: The Role Of The State Social Securi
Page 92 and 93:
The Social Security Administration
Page 94 and 95:
Page 96 and 97:
Page 98 and 99:
Page 100 and 101:
Page 102 and 103:
The Internal Revenue Service (IRS)
Page 104 and 105:
The Internal Revenue Service Overvi
Page 106 and 107:
The Internal Revenue Service Region
Page 108 and 109:
The Internal Revenue Service 2. Wha
Page 110 and 111:
THIS IS A BLANK PAGE —THROW AWAY
Page 112 and 113:
Public Employers NOTES Local govern
Page 114 and 115:
Public Employers NOTES Local Govern
Page 116 and 117:
Public Employers NOTES Example: A
Page 118 and 119:
Public Employers NOTES group-term l
Page 120 and 121:
Public Employers NOTES 2. the emplo
Page 122 and 123:
Public Employers NOTES Advance Earn
Page 124 and 125:
Public Employers NOTES Electronic D
Page 126 and 127:
Public Employers NOTES Wage Reporti
Page 128 and 129:
Public Employers NOTES How SSA Proc
Page 130 and 131:
Public Employers NOTES Paper Form W
Page 132 and 133:
Public Employers NOTES Questions 1.
Page 134 and 135:
Social Security and Medicare Benefi
Page 136 and 137:
Page 138 and 139:
Page 140 and 141:
Page 142 and 143:
Page 144 and 145:
THIS IS A BLANK PAGE __ THROW AWAY
Page 146 and 147:
Publications, Forms and Other Resou
Page 148 and 149:
Publications, Forms and Other Resou
Page 150 and 151:
Glossary 13
Page 152 and 153:
Glossary of Terms Absolute Coverage
Page 154 and 155:
Government Pension Offset The gover
Page 156 and 157:
Social Security Administration (SSA
Page 158 and 159:
THIS IS A BLANK PAGE—THROW AWAY
Page 160 and 161:
Appendix Internal Revenue Service R
Page 162:
Appendix United States Circuit Cour
Page 165 and 166:
Appendix Internal Revenue Service D
Page 167 and 168:
Appendix (5) Such agreement shall,
Page 169 and 170:
Appendix (C) For the purposes of th
Page 171 and 172:
Appendix (B) such retirement system
Page 173 and 174:
Revenue Ruling 86-88 Revenue Ruling
Page 175 and 176:
Revenue Ruling 86-88 Q7. An employe
Page 177 and 178:
Revenue Ruling 86-88 Q16. Will all
Page 179 and 180:
Appendix Q5. In November 1982, an i
Page 181 and 182:
Appendix (2) Periods of more than 3
Page 183 and 184:
Appendix (4) Credited service for p
show all

Publication 963 (Rev. October 1997) - Uncle Fed's Tax*Board

Create successful ePaper yourself

Delete template?

Save as template?