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SECTION 530 RELIEF REQUIREMENTS
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If your business has been selected for an I. Reporting Consistency reasonable basis for not treating the workers
as employees, you can show that:
employment tax examination to determine First, you must have timely filed all required
whether you correctly treated certain federal tax returns (including information • You reasonably relied on a court case
workers as independent contractors, you returns) consistent with your treatment of about federal taxes or a ruling issued to
may be entitled to section 530 relief. You each worker as not being an employee. This you by the IRS; or
will not owe employment taxes for these means, for example, that if you treated a • Your business was audited by the IRS at
workers if you meet the relief requirements worker as an independent contractor and a time when you treated similar workers
described below. If you do not meet these paid him or her $600 or more, you must as independent contractors and the
relief requirements, the IRS will determine have filed Form 1099-MISC for the worker. IRS did not reclassify those workers
whether the workers are independent Relief is not available for any year and for as employees. You may not rely on
contractors or employees and whether you any workers for whom you did not file the an audit commenced after December
owe employment taxes for those workers. 31, 1996, unless such audit included
required information returns.
Section 530 Relief Requirements: an examination for employment tax
To receive relief, you must meet all three of II. Substantive Consistency purposes of whether the individual
the following requirements: In addition, you (and any predecessor involved (or any other individual holding
business) must have treated the workers, a substantially similar position) should
and any similar workers, as independent be treated as your employee; or
contractors. If you treated similar workers • You treated the workers as independent
as employees, this relief provision is not contractors because you knew, and can
available. If you are paying an individual substantiate, that was how a significant
who is providing services as a test segment of your industry treated similar
proctor or room supervisor assisting in workers; or
the administration of college entrance or • You relied on some other reasonable
placements examinations, the substantive basis. For example, you relied on
consistency requirement does not apply the advice of a business lawyer or
with respect to services performed after accountant who knew the facts about
December 31, 2006, (and remuneration your business.
paid with respect to such services). The
If you did not have a reasonable basis
provision applies if the individual (1) is
for treating the workers as independent
performing the services for a tax-exempt
contractors, you do not meet the relief
organization, and (2) is not otherwise treated
requirements.
as an employee of such organization for
purposes of employment taxes. The IRS examiner will answer any questions
you may have about your eligibility for this
III. Reasonable Basis relief.
Finally, you must have had a reasonable
basis for not treating the workers as
employees. To establish that you had a
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