Outline Transcript Links Bios

Hello.

My name is Anita Bartels.

I'm the acting policy manager for the Employment Tax Unit in the Small business self-employed Division of the IRS.

I'd like to welcome everyone to our webinar today.

We're going to be talking about worker class ification.

It's designed for businesses with workers, practitioners and other stakeholders who deal with these businesses.

I hope you'll find the presentation both helpful and informative.

We'd also like to extend a welcome to any participants representing the news media.

If you were with the media, please send us a message at SBC.

DOT Webinars at IRS dot gov.

With your contact information.

Our media Relations staff can answer any questions you might have following the presentation.

Today we're going to talk about what you need to know to properly classify your workers.

If you've been treating workers as independent contractors or other types of not employees, we will provide some information about a new IRS program that will help you voluntarily reclassify those workers for future tax periods.

The program, which is called the Voluntary Classification Settlement Program, or VSP, will allow partial relief from the federal employment taxes resulting from that change.

Everything we talk about, including forms, instructions, public signs and web pages, is available on the w w w irs dot gov website.

So don't worry about taking notes.

Just jot down any questions you may have.

And by the end of this webinar you'll know where to look for answers to your federal tax questions.

But just in case we'll have a question and answer session at the end of the presentation, you can ask questions during the webinar by clicking the ask a question link under the PowerPoint window and selecting the submit button at the end of the presentation.

A team of subject matter experts will respond to your questions about proper worker class ification.

This presentation is informational only will provide you with general information about the law and what factors and situations indicate that a worker should be treated as an employee and which situations indicate workers should be treated as independent contractors.

We will not be able to provide you with specific answers to your individual situations.

Worker classification determinations are made on a case by case basis.

Each determination depends on the specific facts and circumstances of that situation.

We'll talk later in the presentation about how you can request a determination from IRAs for your workers.

If you ask a question, please avoid revealing any sensitive or identifying information that might disclose improper information about you, your business, your clients, or anyone else for your convenience.

We have provided you with a PDF file of this presentation to download and print.

This program will be archived on the IRS video portal for later viewing.

One of the biggest tax issues for businesses is determining whether workers are our employees or independent contractors.

If a worker's an employee, the employer is responsible for withholding income tax and the employee's portion of Social Security and Medicare tax from amounts paid to that worker.

The employer must remit these withheld amounts to the IRS, along with the employer's portion of Social Security and Medicare tax and the necessary federal unemployment tax.

On the other hand, if a worker is an independent contractor, the business is not responsible for any payroll taxes.

Some companies believe that they can simply choose whether to treat any given worker as an employee or an independent contractor.

However, there are laws that determine whether the worker is an employee or an independent contractor, so it's important to make the proper classification.

The information we're covering is in our publication 1779 independent contractor or employee.

It's also on the IRS website.

An employee is an individual who performs services for you and who is subject to your control regarding what work will be done and how the work will be done.

If you retain the right to direct and control the means and details of the work, then the worker is an employee.

The only definition of this right to direct and control outside of court cases is in the Treasury regulation shown on your screen right now.

In contrast, an independent contractor may perform services for you, but you control only the result of the work, not the means and methods of accomplishing the result.

Generally, there are three main categories of evidence that show whether a worker is an employee or an independent contractor.

First is behavioral control.

Does the company control or have the right to control not only what the worker does, but also how the worker does the job?

Then we have financial control.

Are the business aspects of the worker's job controlled by the company?

This can include things like how the worker is paid, whether expenses are reimbursed, who provides tools and supplies, etc..

And finally, is the type of relationship.

Are there written contracts or employee type benefits like pension plans, insurance, vacation pay?

Will the relationship continue?

Is the work performed a key aspect of the business?

Businesses need to weigh all of the factors when determining whether a worker is an employee or an independent contractor, even where most factors indicate one classification, say, is an employee.

There may be a few factors that could be somewhat consistent with the other classification that of an independent contractor.

It's important to remember that the correct classification looks at the entire picture.

There is no magic or set number of factors that make the the worker an employee or an independent contractor.

And no one factor can stand alone when you're making this determination to make it even more complicated.

Some factors that are relevant in one situation may not be relevant in another.

So the key is to look at the entire relationship.

Consider the degree or extent of the right to direct and control.

And finally, to document each of the factors you use in coming up with a determination.

You can find much more information about the categories of evidence and worker classification and publication 15 A The Employer's Supplemental Tax Guide.

Now, let's look at each of the categories of evidence in more detail versus behavioral control.

Among the key factors in behavioral control are instructions and training as they cover a lot.

Types of instructions that indicate an employee's status include things like when and where to do the work, what tools or equipment to use, what workers to hire, or to assist with the work, where to purchase supplies and services, what work must be performed by a specific individual?

What order sequence to follow when performing the work?

When we talk about the degree of instruction, we mean that the more detail the instructions, the more control the business exercises over the worker.

More detailed instructions indicate that the worker is an employee.

Less detailed instructions reflect less control, which is an indication that the worker may be an independent contractor.

The next factor is evaluation.

If the evaluation system measures the details of how the work is performed, then it points to employee status.

If the evaluation system just measures the result, then it may point to either an independent contractor or an employee, depending on other circumstances.

Finally, there's training.

Training means explaining detail, methods and procedures to be used in performing a task.

If the business provides the worker with training on how to do the job, it indicates that the business wants the job done in a particular way and has strong evidence that the worker's and employee periodic or ongoing training about procedures and methods is even stronger evidence of an employer employee relationship.

When looking at behavioral control, the key factor to consider is whether the business retains the right to control the worker and the details of how the services are performed, regardless of whether the business actually exercises that right.

For example, a plumber agrees to install plumbing in a new warehouse that's being built.

Upon arriving at the warehouse, the plumber is given the building plans that show where the plumbing is to be installed, and he's advised that the plumbing must be completed within five days.

In this case, the plumber was told what to do rather than how it is to be done, which is consistent with independent contractor status.

Now consider a plumber who works out of the local local plumbers union office.

The warehouse general contractor tells the plumber what plumbing has to be done.

Gives specific instructions on installation, the tools to use, and the order in which the plumbing is to be installed.

These are specific instructions on how the work must be performed and our consistent with employee status.

The second category of evidence is financial control.

Financial control refers to whether or not the business has the right to control the financial aspects of the worker's job.

There are several different ways a business can exercise financial control.

First, there's investment.

An independent contractor could have a significant investment in the equipment he or she uses in working for someone else.

However, in many occupations, such as construction, workers can spend hundreds of dollars on the tools and equipment they use and still be considered employees.

There are no precise dollar limits that define the term significant investment.

Furthermore, a significant investment is not necessary for independent contract status as some types of work simply do not require large expenditures.

What about expenses?

Employers are more likely to reimburse employees for their job expenses, while businesses usually do not reimburse independent contractors for expenses.

However, it's certainly possible for an employee to incur expenses that are not reimbursed.

For example, a teacher may buy erasers, posters and other minor supplies throughout the year.

Teachers are not generally reimbursed for these expenses, but minor expenses incurred by an employee do not indicate an independent contractor relationship.

Teachers are employees.

The opportunity for the worker to make a profit or incur a loss is another important factor.

We're not talking about simply working more hours to earn more money.

If a worker has a significant investment in the tools and equipment used, and if the worker has business expenses that must be paid, there's a greater opportunity to lose money because the expenses may exceed the income from the work.

Having the possibility of incurring a loss indicates that the worker has some ability to control the financial outcome of a job and may be an independent contractor.

Availability of service may be another indication of independence of the worker services available to the market.

Independent contractors often advertise, maintain a visible business location and make themselves available for the relevant market.

They're generally free to seek out business opportunities.

Finally, the method of payment has to be considered.

Is the worker paid by the job or the hour?

Hourly, weekly or similar types of payments in return for Labor is generally evidence of an employer employee relations ship.

A flat fee may be evidence of independent contractor status, especially if the worker incurs expenses while performing the services.

Just like the behavioral control factors, financial control contains no one factor that takes precedence over the others.

It's a matter of looking at the whole relationship and seeing where the preponderance of evidence lies.

Next, let's take a look at some of the elements that can be present in the type of relationship between the two parties.

Is there a valid written contract?

A contract that simply states that the worker is an employee or an independent contractor is not sufficient to determine the worker status?

The IRS is not required to follow a contract that simply says, I agree to be treated as an independent contractor and I will be responsible for paying my own self-employment tax.

How the parties work together is important in determining whether the worker is an employee or an independent contractor.

So here are some questions to ask when considering the type of relationship.

Our employee type benefits provided.

These can include things like insurance, pension plans, paid vacation, sick days, and disability insurance.

Businesses generally do not grant these benefits to independent contractors.

However, the lack of these benefits does not necessarily mean the worker's an independent contractor.

Does not all businesses offer benefits?

How permanent is the relationship?

If you hire a worker with the expectation that the relationship will continue indefinitely rather than for a specific project or period, it may be considered evidence that the intent was to create an employer employee relationship.

Are the services provided a key activity of the business?

If a worker provides services that are a key aspect of your regular business activity, it's more likely that you will have the right to direct and control his or her activities.

For example, if a law firm hires an attorney, it's likely they will present the attorneys, work as its own, and would have the right to control or direct that work.

This would indicate an employer employee relationship.

We often get questions from business owners about how to treat casual labor or day labor.

For each worker, you need to look at all of the factors we've just discussed and see whether they indicate that the worker is an employee or an independent contractor.

The length of time the worker performs services for you is not a stand alone factor in determining his or her status.

A worker can be an employee even if he or she only performs a few hours of services.

After reviewing these three categories of evidence, if you're still not sure whether a worker is an employee or an independent contractor, you can file a form associate determination of worker status for purposes of federal employment, taxes and income tax withholding with the IRS.

The IRS will review the facts and circumstances and officially determine the worker status.

There's no user fee for an SSA determination, but you should expect to wait at least six months for the determination, especially as the volume of associates increases.

However, it may be worth it for a business that will continually hire the same types of workers to perform particular services.

Either workers or businesses can file the form SSA for determination from the IRS.

What happens when workers believe that they've been misclassified?

Well, let's look at Form 8919.

Uncollected Social Security and Medicare tax on wages.

Workers who believe they've been improperly classified as independent contractors can use this form to tell the IRS they believe they should be employees and to report their share of Social Security and Medicare taxes.

Anyone who believes he or she has been incorrectly classified must use form 8919, which the IRS developed specifically for this purpose.

The instructions on the form specify that it is used to figure and report the worker's share of uncollected Social Security and Medicare taxes.

If the worker was an employee but was treated as an independent contractor on the form, the workers have to select one of eight reason codes to show why they believe they were employees rather than independent contractors.

For some of the reason codes form SSA must already have been filed.

For others, the worker is required to file the SSA before filing his or her tax return.

One category of workers that businesses often treat incorrectly is corporate officers.

You might think you need to go through all these tests for corporate officers, but you don't because officers are specifically included within the definition of employee for purposes of figure FUDA and federal income tax withholding.

The common law standard we've been discussing does not apply to corporate officers.

There is a narrow exception.

An officer is not considered an employee of the corporation if two requirements are met.

If the officer does not perform any services or performs only minor services and the officer is not entitled to receive directly or indirectly any remuneration for the services he or she performs, compensation to the officer can include distributions, loans to shareholders, payment of personal expenses, excessive rent payments, management fees or fringe benefits.

There are numerous court cases and rulings indicating that the IRS has the authority to reclassify all or part of payments made to a corporate officer as wages.

Let's look at just two cases that support the authority of the IRS to re classify payments to officers.

If these cases is new in new Look Design Inc.

versus Commissioner, the court ruled the corporate shareholder officer performed more than minor services for the taxpayer for which he received remuneration.

Therefore, he was an employee under Internal Revenue Code Section 3120 1d1.

The court further stated that since there was no reasonable basis for the corporation's failure to treat the officer as an employee, there was no basis for relief under Section 530 and we'll be discussing Section 530 and a few moments.

The court made a similar ruling in veterinary surgical consultants, PC versus commissioner.

In this case, a veterinarian was the sole shareholder of the corporation and served as its president and only officer.

All of the corporation's income came from the services provided by this veterinarian, so his compensation was wages.

Section 530 relief was not available because the petitioner had no reasonable basis for not treating the individual as an employee.

As we've seen, the status of a worker as either an independent contractor or an employee must be determined accurately to ensure that workers and businesses can anticipate and meet their tax responsibilities.

Businesses decide whether to hire employees or independent contractors, depending on individual needs, customer expectations and worker availability.

Either worker classified, an independent contractor or employee can be a valid and appropriate business choice.

The IRS does not challenge the majority of classifying stations of workers.

What it does, there's usually agreement between the IRS and the business after they review the facts and circumstances of the case.

However, in certain circumstances, Section 530 of the Revenue Act of 1978 can relieve businesses of employment tax liability resulting from worker misclassification.

Section 530 provides businesses with relief from federal employment tax obligations.

If the business meets certain requirements.

It terminates the businesses, but not the worker's liability for employment taxes, including federal income tax withholding, Social Security and Medicare taxes or fire and federal unemployment tax fuda.

It also means the business is not required to pay any interest or penalties resulting from the liability for employment taxes.

Information on section 530 relief is in publication 1976.

Section 530 Relief Requirements.

You can find this publication on IRS dot gov.

The business must meet the following three requirements to receive relief under Section 530.

Reporting consistency, substantive consistency, and reasonable basis.

Meeting all three of these tests means the business will not owe employment taxes for the workers in question.

Now let's go over each requirement in a little more detail.

The business must demonstrate two types of consistency for 530 relief.

First, the business must treat all workers in similar positions the same.

This is called substantive consistency.

The business and any predecessor business must not have treated the workers or any similar workers as employees either in the current year or in any prior year.

If the business treated similar workers as employees, the relief provision is not available.

In other words, treatment of the workers must be consistent with the position that they were not employees.

If the business treated a worker as an independent contractor, it must have treated all workers in a similar position as independent contractors.

For example, if a business had 20 workers performing the same duties under the same direction and control and treated 15 as employees and five as independent contractors, the business would not meet the consistency test.

Second, the business must have filed all required federal tax returns, including information returns on a consistent basis.

This is called reporting consistency.

What this means is that if a business believes that a particular worker or group of workers were properly classified as independent contractors, then the business must demonstrate to the IRS that it properly filed all required forms for those independent contractors.

For example, if the business paid someone $600 or more for services performed during the calendar year, that it must have reported the payments to the worker on a 1099 miscellaneous.

So unless the worker earned less than $600, that business must have filed a form 1099 Miscellaneous for each worker.

Relief under Section 530 is not available for any year.

The business did not file the required forms.

1099 Miscellaneous.

If it filed. Forms.

1099 Miscellaneous for some workers but not for others.

Relief is only available for the workers for whom the 1099 Miscellaneous was filed.

Businesses that mistakenly but in good faith file the wrong type of form.

1099 do not lose their ability to request relief under Section 530.

In addition to meeting both of the consistency tests, the business must also have a reasonable basis for not treating the workers as employees.

To establish this, the business can show that it reasonably relied on a court case about federal taxes or a ruling issued to the business by the IRS or its employment.

Tax liabilities were audited by the IRS at a time when it treated similar workers as independent contractors.

And the IRS did not reclassify these workers as employees or it treated the workers as independent contractors because it had knowledge.

That was how a significant segment of the industry treated similar workers or it relied on some other reasonable basis.

For example, the business relied on the written advice of a business lawyer or an accountant who knew the facts about the business.

If the business did not have a reasonable basis for treating the workers as independent contractors, it does not meet the relief requirement.

If the business claiming 530 relief is relying on judicial precedent, the ruling or court case it is using must have been in effect before it began treating the workers as independent contractors.

For industry practice, you need some sort of proof or documentation that you knew at the time you began treating your workers as independent contractors, that this was the practice in your industry.

For example, you might have taken a survey in the industry.

Okay.

So far we've reviewed how to classify workers, how to get help with classification, how to treat corporate officers, and who may be eligible for section 530 relief.

But what about businesses who have determined that they've been treating their workers improperly and want to voluntarily classify their workers as employees?

If you're one of those businesses, will you face a large tax bill and penalties?

The good news is that the IRS has developed the V, CSP, the Voluntary classification settlement program for just such taxpayers.

This KSP allows eligible taxpayers to reclassify their workers as employees for future tax periods for employment tax purposes, and receive partial relief from federal employment taxes.

The program, which was released in announcement 2011 64, allows eligible taxpayers to obtain relief similar to that currently available through the Classification Settlement Program.

For taxpayers who are under examination to participate in the CSP.

Taxpayers must apply, meet certain eligibility requirements and enter into a closing agreement with the IRS.

If you qualify for the CSP, you will agree to treat the worker or the class of workers as employees for future tax periods.

You'll have to pay 10% of the employment tax liability that may have been due on compensation paid to the workers for the most recent tax year.

Determined under the reduced rates of Section 30 509a of the Internal Revenue Code.

BXP does not require any interest or penalties on that liability.

The IRS has frequently asked questions or facts or fake news about the program, including a question on how to calculate the XP payment on the VCs pages of IRS dot gov business.

You should wait until the IRS accepts the application before making payment.

If you enter into a CSP, you will not be subject to an employment tax audit.

With respect to the worker classification of the workers being reclassified under your agreement for prior years.

Finally, if you participate in the program, you'll be agreeing to extend the statute of limitations on assessment of employment taxes for the first, second and third calendar years beginning after the date on which you have agreed under the VCs closing agreement.

To begin treating the workers as employees.

Two Participate in the CSP.

You must apply using Form 8952 Application for Voluntary Classification Settlement Program.

You should file the application at least 60 days before the date.

You want to begin treating your workers as employees.

If you want a representative to help you with the application process, make sure you provide the name of your contact or authorized representative on a valid power of attorney, which is form 2848 along with your application.

The IRS will review the application and verify your eligibility.

Once accepted, the IRS will contact you or your authorized representative to complete the process.

If you're eligible, you will have to enter into a closing agreement with the IRS to finalize the terms of the VSP full and complete payment of any amount due under the agreement must be remitted when you send the signed closing agreement.

If the IRS rejects ABC SPE application because you're not eligible, you will be notified, but you may reapply at a future date.

As we explained, the Voluntary Classification Settlement program applies to taxpayers who are currently treating their workers or a class or group of workers as independent contractors or other non employees and who want to prospectively treat the workers as employees.

That includes exempt organizations and government entities, provided they meet all of the requirements to be eligible, a taxpayer must have consistently treated the workers as non employees and must have filed all required forms 1099 for the workers for the previous three years.

Also, the taxpayer cannot currently be under audit by the IRS and cannot be currently under audit.

Concerning the classification of the workers by the Department of Labor or by a State government agency.

A taxpayer who was previously audited by the IRS or the Department of Labor concerning the classification of the workers will be eligible only if the taxpayer has complied with the results of that audit.

Form 8952 and its instructions contain information about the program.

As you've heard, the VCs pages on IRS dot gov contain information about the program, including frequently asked questions.

To find these pages, simply go to the employment tax pages under businesses or just type bxp in the search box.

Finally, Announcement 2011 Dash 64 Also available on the VCS pages of IRS dot gov has all of the details about the program.

Now let's review what we've talked about.

We started out with the basic definitions of the two types of workers, employees and independent contractors.

Next, we move through the categories of evidence used to properly determine a worker status.

Then we reviewed how the SSA form and the Form 8952 are used for worker classification.

We also covered the fact that corporate officers are considered to be employees and then move to misclassification of workers in section 530 Relief.

Finally, we covered the basics for the Voluntary Classification Settlement program.

Don't forget to check the links on the registration page for more information about the topics we covered today.

This concludes the video portion of the webinar and I thank you for watching.

I hope you found it helpful and informative.

Please stay tuned for the Q&A portion of our webinar.

If you have any questions, please send them in by selecting the ask a question link under the PowerPoint window and then select the submit button.

Just remember, we cannot comment on specific situations or facts and circumstances, so please keep your questions general in nature and do not give any identifying information in your questions.

Thanks again and you can start.

Okay.

Hi, I'm Jerry Kelly Brenner with the Small Business and Self-employed Division, also known as SBC.

And we hope you found today's webinar helpful and informative.

I'm here today with Anita Bartels, who's joining us for the Q&A portion of our broadcast.

And also with us is Tom Travers, special counsel for SBC Counsel headquarters.

Anita and Tom will be answering the questions you've submitted, and I will be monitoring the questions for us.

So now let's out what questions are on your mind?

Anita I think this is a good one to start with because from the registration it appears that we have a lot of tax exempt and government entities.

So here's your first question.

I thought I heard that tax exempt and government entities could apply for the voluntary classification settlement program, but I'm not sure.

Are those employers eligible for vxi?

thanks, Gerri.

The short answer is yes, they can.

Tax exempt and government entities are certainly if they meet the requirements, they are certainly eligible for the VA vxi.

Great. Thanks for that clarification, Tom.

This seems like a pretty general question.

Maybe you can respond to this one to begin your portion of the Q&A.

How can I tell whether my workers are employees or independent contractors?

Thanks, Jerry.

It is a general question, and the response also, unfortunately, has to be a bit general because as the webinar materials showed, the issue between and work classification between an employee and an independent contractor is dependent on a number of factors that really are unique to each case.

And case to case determination needs to be made based on a weighing of those factors of involving control, behavioral control And a lot of the elements that we went over in the webinar materials.

Thanks, Tom.

Anita, is this enough information to be able to determine employee or independent contractor status?

Your question is based on your experience.

Most people who work in hair or nail salons should be treated as employees or independent contractors.

Well, as Tom just said, everything single thing.

Every time we begin to make this determination, it depends on the categories of evidence and the factors.

You've got to look at behavioral control.

You've got to look at financial control.

You've got to look at relationship of the party, and then you have to make the decision.

But what you have to remember is that these categories point to whether the business has the right to control the means and methods by which the worker does the job, even if that control is never exercised.

So I can't give you an answer based on experience.

It has to be based on the facts and circumstances of that particular situation.

Thanks, Anita.

Tom, here's what about training?

What about training on how to access an employer's system such as a computer system so that the worker can do the job?

Evidence of employee status or is this independent contractor?

Well, I know that in the webinar it was mentioned that training could be one element of the existence showing the existence of a of an employee status.

But it is one element, and it would depend on, you know, not just other elements, but also the type of training and what was involved in in this this particular training.

You know.

This seems to be fairly basic, low level training on an employer system to access its computer system, for instance.

And if that's the only element, but in other ways the the worker is able to choose their hours to choose their method of work is responsible, for instance, for bringing their own tools.

And there's this only this one element that they receive training on the computer system.

You know that then the balance seems to be would be would go one way.

On the other hand, if it's part of a comprehensive package of of employee benefits and and directions and uniforms and other factors that would indicate an employee status rather than an independent contractor, then that would be, again, one element that would go to support the ultimate finding.

So standing alone, training on how to access an employer's system might be seen as evidence of an employee status.

But I would say absent other things, it wouldn't be determinative generally.

Thanks, Tom.

Anita.

Businesses certainly don't ever want to be under examination.

But yeah, but this particular question says, What if my business is under examination?

Can I still qualify for the VSP?

Well, the short answer is no, not as long as you're under examination.

However, once the examination is over, then you can apply for the XP.

And again, if you're eligible, then you may well be provided with one.

Thanks, Anita.

Tom, here's one for you.

If a worker volunteer is to be treated as a contractor, I don't know who would be volunteering.

But this is the question.

If a worker volunteer is to be treated as a contract worker, even though he is an employee, he works for a nonprofit and he wants to save the nonprofit money.

Will the nonprofit still be subject to penalties?

Well, I guess I don't really want to get into, you know, the question of penalties that's so far beyond, I think, the webinar and our talk here.

But I think if we were to talk about, you know, can somebody agree to be treated as an independent contractor even though they are an employee, I think really we're talking about a legal determination with legal implications and legal, you know, results which and responsibilities that really somebody's saying that they the worker just saying, well, treat me as a worker really does not carry the day.

It really is the again, the context of the facts of the working relationship that determines that.

And you can't I don't believe a worker could make an agreement with with the employer or the the company to be treated a certain way.

That that's not that really isn't the way it would be handled.

It remains to be determined based on the relationship, the working relationship and conditions that were laid out in today's webinar.

So an employer and a worker can't just agree to the way that the person is going to be treated.

They have to follow the categories of evidence.

I would say not.

Now, you know, I don't want to say yes again, I want to steer clear of, you know, blanket rules and things because but I would say that that doesn't sound like an appropriate approach to me.

Thanks, Tom.

Temporary employment agencies are very popular these days, Tom.

Here's a question about them.

If a person is working through a temporary employment at my company, can this person be considered my company's employee?

That person would be the employee of the temporary employment agency and, not of the client of the temporary employment agency.

So I think the answer there is that the answer would be no, that that that person is that worker is the employee of the temporary employment agency and not of the client of that agency.

Thanks, Tom.

Anita.

Here are a couple of questions about associate determination.

The first one is can an employer appeal an SSA determination of worker status or request a reconsideration?

Well, and SSA determination is not in the nature of an examination.

So the normal what we consider the normal appeals process doesn't necessarily apply.

They absolutely can request a reconsideration.

And however, what you have to remember that is that if you simply send in continue to rescind the same SSA with the same information on it, you'll probably get the same result each time.

So if you want a reconsideration, I think what you need to do is make sure that you have if you have other information, more information, more specific information, then you need to add that to the SSA before you send it in so that they have something else to consider.

Otherwise, you'll just get the same result each time.

And will it take just as long the second time around to get it considered?

Well, I would say chances are fair that it will. Yes.

But still, if it's something that's important to you and you want to make sure that you get that determination, then send it in.

Okay, great.

Anita, here's the second question about SSA eight.

If a state agency makes a determination that a worker has been misclassified as an independent contractor for unemployment claim purposes or wage claim, how much weight does the IRS place on the determination if it performs an associate investigation?

Well, again, Tom just discussed the factors that we used and we, of course, talked about it when we were doing the webinar.

But that decision is not going to be based just on that state determination.

Now, that will certainly be one of the factors, but we're still going to look at the behavioral control and the financial control and the relationship of the parties.

And we're still going to determine whether that company that is hiring that worker or is using that worker has the right to control the way that worker does that job.

So it all boils down to the right to control and so it can't this again, this is one of the factors and it will certainly be something that they consider, but it's not going to be the only factor.

Thanks, Anita.

Tom, you had asked answered a question about training previously, and here's another one regarding training.

Federal regulations require motor carriers to ensure that their ices comply with hazardous material and safety regulations.

If the motor carrier provides instructions on what these governmental regulations are.

Does that exhibit behavioral control or merely compliance with regulatory requirements?

This is a good question and shows how the I think the nature of the this whole balancing aspect of all the factors needs to be taken in by a case by case approach.

For instance, this talks about training, but really the training is, as it notes, about regulatory requirements and meeting those.

I think that is that's that type of training would be expected for, you know, hazardous material and that type of training for independent contractors and employees alike, you would think, because it requires meeting regulatory requirements.

I think the type of training that would be more relevant to the determination of worker classification would be how much of the training is meant at directing at a certain way to do a job or certain procedures or certain work hours or conditions for doing the job.

That's the type of training I think, that is more relevant to making the determination for a person being a worker, an employee versus an independent contractor.

This question goes to training that is really doesn't go to that because it has to do is everybody is expected to comply with the law and regulations particularly you would think with hazardous materials.

And so this probably wouldn't go to that determination much at all, if at all.

I don't think it would, because, again, it goes to something that is not really job related.

It's compliance with the law.

The conditions about training, I think, really go more to how to do the job, when to do the job, the way to do it, and the conditions of doing the job.

And that's the type of training or lack of it that goes to worker classification.

That's that's great.

Tom, to clarify that there's different types of training and one may qualify under these circumstances and another may not.

So that's great that you bring that up.

By the way, Anita had mentioned during the webinar about preponderance of evidence.

And Tom, maybe you can answer or reply to this one.

You indicated or Anita in this particular case indicated that the worker classification decision is determined based upon a preponderance of the evidence standard near the 20 minute mark of her presentation.

Is this defined as more probable than not?

And is associated with a probability of more than 50%?

Does this mean that if more than 50% of the T factors denote independent contractor status, you will find the worker to be an independent contractor?

And if not, what is the relevant standard?

Well, I if the factors that go into the determination of worker classification I don't think should be viewed as a scorecard.

I don't think it's something where if it's 11 to 9 or 15 to 4 or 10 to 8, that one side or the other wins, It's really not The different elements, different factual contexts are all may not and likely aren't evenly evenly weighted.

It's looking at the entire relationship, taking a look at the working conditions, the behavioral control, the financial control.

And some of these will be larger and of more significance than others.

I think, for instance, that last question having to do with the training of regulation, that's a that's that's a pretty marginal type element.

Meanwhile, I think regulation, you know, instructions on how to perform the job, what to wear, that type of thing, would be more indicative and more heavily weighted in the worker classification.

Question.

So I think this question brings up almost a score card type approach that really isn't appropriate in this area.

Thanks, Tom.

Here's one more for you.

Anita had answered a question about BXP and also about.

So here's one.

If you apply for the VCs P, does that potentially expose you to a complete audit?

So this question is good because it also brings up something that's available to the public on the IRS website.

And the IRS has a set of frequently asked questions for the VCS program out there, and these are really informative, very helpful, and I encourage everybody to look at them.

And question 21 of those questions goes to this point and that question is, if I apply for the VCs, my application is rejected.

Will I open myself up to an audit?

And the answer goes straight to that question.

And the question that's being asked, and it is rejection.

No rejection of a VCs application will not automatically trigger initiation of a federal audit.

You could be audited for reason, but not as a result of filing form 8952 with the VCs application.

So that's the answer to that question.

And again, I'd encourage everybody to take a look at those frequently asked questions on the VCS program available on the IRS website.

There are a lot of great frequently asked questions that are there, and I know, Tom, that they get updated regularly.

So I think that everyone should go there regularly. Yes.

Anita, here's a question about Section 530.

Do I have Section 530 protection If I provide my workers with 1099 so not W-2s?

Well, that's not going to be enough.

Just like everything else we responded to.

This is not a simple question to have Section 530 protection, you have to meet the two consistency standards, which are pretty substantive consistency that's treating all the workers in the similar class of workers in the same way.

So if you have two people who are treated as employees and two who are treated as independent contractors, then you can't have section 530 and reporting consistency.

You have to have filed all the 1099 or W-2s.

In this case, it would be 1099 consistent with the way in which you're treating them.

So if you want them to be treated as independent contractors, you have to file the 1099.

But but that's not enough.

Once you meet both of those two requirements to qualify for Section 530, you still have to meet one of the following.

You have to have industry practice, you have to have a prior audit.

You have to have a judicial precedent or you have to have some other reasonable basis.

So it's not as simple as just 1099 versus W-2s in this case.

Anita and Tom, I want to pose a question to each of you.

What would you like those who are listening today to especially remember from all the valuable information that you've shared?

Anita, why don't you go ahead and go first?

Okay.

Well, this whole webinar and the question and answer session was, is about worker classification.

And while we recognize that either status, independent contractor or employee could be a valid business discussion, we want to make it clear that that's not really a choice.

It's based on the law.

And you have to consider the law when you're determining how you're going to treat your people.

Now, if you believe your workers were incorrectly classified as independent contractors, then consider the voluntary classification settlement program.

And I absolutely agree with Tom.

Check out the website there.

There's a lot of valuable information there.

And finally, when in doubt, file on SSA and let the IRS make a determination for you.

And I wanted to thank everyone for participating and for being for sending in the questions and so on.

We appreciate it. Thank you.

Thanks, Anita.

Tom, what would you like them to remember?

I think I'd like to send them off with is the encouraged to take a look at the BXP, the voluntary classification settlement program for employers who have been troubled about the classification of their employees.

I think this is a great program that offers both relief to the issue where they may be facing some issues on that.

And it's a new program that the IRS is enthusiastic about.

And I think some employers will also be enthusiastic about it.

So I'd encourage them to take a look at the program as well.

As I said, the frequently asked questions and look into it. So that's that's it for me.

Anita, Tom, thanks so much.

Thanks so much for all of your valuable information that you shared today.

For all of you who have attended today, that's all of our questions for today.

So thanks so much for watching our webinar.

We hope you learned a few things about determining how to classify workers as employees or independent contractors and about the Voluntary Classification Settlement program.

If you have any questions that were not answered today, please visit the employment tax pages on w w w dot, irs, dot Jehovah or simply use the keywords worker classification to find a lot more information.

Thanks again for your time and attendance and we hope you have a great day.

Thanks Jerry.

Thanks, Jerry.