RS 02101.009 Employer Employee Relationships — Recent Legislation Affecting Social Security Tax Collections

Employer-employee relationship questions have continued to be troublesome. Employers who concluded that individuals performing services were independent contractors protested to Congress IRS assessments of Social Security taxes on the basis that the workers were employees. Employers also protested that the common-law rules are too subjective to permit an employer to determine the actual status of the services.

As a result, Congress enacted legislation (section 530 of P.L. 95-600, the Revenue Act of 1978), which precludes IRS from assessing Social Security taxes under certain conditions. Generally, the employer must have had a reasonable basis for considering the worker to be an independent contractor and have filed Federal tax forms accordingly. See RS 02101.808 for more information about this provision.