The SS-8 Program issues determination letters to workers and firms regarding the proper classification of workers performing services for the firm (that is, employee or independent contractor). See IRM 4.23.3.3.3, SS-8 Program. The issue of worker classification is often addressed as part of an employment tax examination of a business. Employment tax examinations may be based on referrals or information from the SS-8 Program after it issues a determination letter. The following procedures are intended to coordinate worker classification issues between the SS-8 Program and Examination.

For additional information, see IRM 7.50.1, Form SS-8 Worker Classification Determinations - Form SS-8 Processing Handbook, which provides procedures for SS-8 Technicians who are responsible for handling determinations of employee-independent contractor status when Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, is filed with the Internal Revenue Service (IRS).

Employment tax provisions are found at Internal Revenue Code Subtitle C:

The Employment Tax Program is governed by Policy Statements and other internal guidance that apply to all IRS personnel regardless of operating division. The Policy Statements found in IRM 1.2.1, Servicewide Policies and Authorities, Policies of the Internal Revenue Service apply to all employment tax issues and examinations. Examiners should review these Policy Statements to properly perform their examination duties.

A website, Search Servicewide Delegation Orders, located at http://irm.web.irs.gov/imd/del/search.aspx provides a searchable list of Servicewide Delegation Orders issued by the Commissioner of the Internal Revenue, or on his or her behalf by either of the deputy commissioners. Delegation Orders pertaining to each IRS business process can be found in IRM 1.2.2, Servicewide Policies and Authorities, Servicewide Delegations of Authority.

IRM 4.23 provides Servicewide instructions for all operating divisions with employees involved with the correct filing, reporting, and payment of employment taxes. IRM 4.23 serves as the foundation for consistent administration of employment taxes by various IRS operating divisions. By providing one source of authority for all operating divisions, the IRS greatly reduces philosophical and procedural inconsistencies.

Director, Specialty Exam Policy, is responsible for the procedures and updates addressed in this IRM.

Director, Specialty Examination, is the executive responsible for examination operational compliance.

Chief, Employment Tax Examination, is responsible for ensuring general information about basic employment tax examiner responsibilities.

Director, Exam - Field and Campus Policy, reports to the Director, Headquarters Examination, and is responsible for the delivery of policy and guidance that impacts the field and campus processes including the SS-8 program.

Program Goals: The processes and procedures provided in this IRM are consistent with the objectives or goals for Employment Tax - Examination that are addressed in IRM 1.1.16.3.3.3, Employment Tax Examination and for Employment Tax Policy, found in IRM 1.1.16.3.5.2.2, Employment Tax Policy.

Program Effectiveness: Program goals are measured with Employment Tax Embedded Quality Performance Reports that monitor whether quality attributes are applied uniformly and consistently.

Annual Review: Employment Tax Policy - Program Manager, is responsible for reviewing the information in this IRM annually to ensure accuracy and promote consistent tax administration.

The following chart contains terms and their definitions used in this IRM:

The following table lists commonly used acronyms and their definitions:

Helpful information sources include:

The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3). For additional information about the TBOR, see www.irs.gov/taxpayer-bill-of-rights.

The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service (IRS), led by the National Taxpayer Advocate. Its job is to protect taxpayers’ rights by striving to ensure that every taxpayer is treated fairly and knows and understands their rights under the TBOR. TAS offers free help to taxpayers, including when taxpayers face financial difficulties due to an IRS problem, when they are unable to resolve tax problems they have not been able to resolve on their own, or when they need assistance to address an IRS system, process, or procedure that is not functioning as it should. TAS has at least one taxpayer advocate office located in every state, the District of Columbia, and Puerto Rico.

Examiners should consider the disclosure and privacy provisions when preparing correspondences and agreed and unagreed case reports. For further information, see the Privacy, Government Liaison and Disclosure (PGLD) maintained knowledge base at https://portal.ds.irsnet.gov/sites/vl003/pages/default.aspx

If a firm is under employment tax examination in Status Code "10" , the case can be either in the Examination group manager’s inventory waiting to be assigned or in an examiner’s inventory waiting to be started.

The SS-8 Technician will contact the Examination group manager to determine the status of the case (whether waiting to be assigned or assigned but not started).

If the case is unassigned, the SS-8 Technician will request permission from the Examination group manager to work the SS-8 and issue a determination.

If the case is assigned to an examiner, the group manager will provide the name of the examiner to the SS-8 Technician to contact for the status of the examination. The examiner may either grant permission to the SS-8 Technician to issue a determination or request that a determination not be made until the examination is completed. If permission is granted to make the determination, the SS-8 Technician will forward a copy of the determination and related case file documents to the examiner upon completion.

If a firm is under employment tax examination in Status Code 12 through 18, the case is currently being worked by an examiner. The SS-8 Technician will not work the SS-8 request in these cases until the employment tax examination is completed.

The SS-8 Technician will contact the Examination group manager and notify the group manager that a Form SS-8 was filed regarding a worker performing services for the firm (taxpayer) under examination.

The SS-8 Technician will notify the taxpayer who submitted Form SS-8 (in most cases this will be the worker) that the Form SS-8 has been received. Until resolution at the field level, the SS-8 request will be placed into suspense.

A copy of the Form SS-8 and any related information will be forwarded to the Examination group manager to be associated with the examination case file.

The field examiner must address the worker classification issue identified on the Form SS-8 as part of the examination. The examiner will follow normal procedures for examining worker classification issues, including first addressing section 530. See IRM 4.23.5.3.1, Section 530 Relief. The examiner should consider contacting the worker, and other workers in the same class, to confirm the facts presented on Form SS-8 and obtain any additional information. Contact made with individual workers constitutes a third-party contact. See IRM 4.23.5.5.1, Supplemental Procedures When Contacting Workers. In no case should the examiner disclose to the worker(s) that the firm is under examination.

The examiner must provide the SS-8 Technician with a quarterly update on the status of the examination to allow the SS-8 Technician to keep the person that filed the Form SS-8 informed about the status of the SS-8 request.

If the examiner determines that section 530 relief applies to the firm, the examiner will not make the worker classification determination applicable to the firm since examination procedures prohibit the examiner from continuing with the worker classification examination when section 530 relief applies. See IRM 4.23.5.3.3, Establishing Section 530 Relief, paragraph (5). However, the SS-8 Technician is still responsible for making a determination as to whether the worker is an employee or independent contractor at the Form 1040 level and issuing the determination letter. To assist the SS-8 Technician, the field examiner will provide any information gathered during the examination of the firm that could assist the SS-8 Technician in making the worker classification determination.

If the examiner determines that the firm is not entitled to relief under section 530 for that class of worker, the examiner will complete the worker classification determination. See IRM 4.23.5.4, Independent Contractor or Employee. Upon completion of the worker classification portion of the examination, the examiner will provide the SS-8 Technician with the results of the worker classification examination, including:

If the outcome of the worker classification examination adjustment is agreed (either a worker classification adjustment was made or the workers were determined to be independent contractors), the SS-8 Technician will issue a determination letter to the worker based on the field examiner’s findings.

If the outcome of the worker classification examination adjustment is unagreed, no determination letter will be issued until the case is resolved in Appeals or in any subsequent litigation.

If the case is in status code "10" or "12" through "18" , the SS-8 Technician will contact the Examination group manager to determine if the examination is being expanded to the employment tax returns or whether a worker classification issue would affect the examination.

If the examination is not being expanded to the employment tax returns and the worker classification issue would not affect the examination, the SS-8 Technician will work the SS-8 case using normal procedures and issue a determination letter. The SS-8 Technician will notify the examiner that the normal determination procedures will proceed.

If the examination is being expanded to the employment tax returns or the worker classification issue would affect the examination, the SS-8 Technician and examiner will follow the procedures in IRM 4.23.18.2.2 above for cases where the firm is under an employment tax examination.

If the worker’s Form 1040 is under examination, the SS-8 Technician will contact the Examination group manager and notify the group manager that a Form SS-8 was filed by the worker (taxpayer).

The group manager will discuss the worker’s Form 1040 with the SS-8 Technician.

The examiner will keep the Form 1040 examination open until the SS-8 Technician completes the worker status determination.

The SS-8 Technician will follow normal procedures for gathering information necessary to make the determination and for issuing a determination letter, however a determination affecting a return open in the field will be worked on an expedited basis. The SS-8 Technician's determination may be based on common law factors (usually indicative of the degree of behavioral/financial control over the worker and the relationship of the parties).

At the end of the determination, a copy of the determination letter will be provided to the examiner.

Upon receipt of the determination letter, the examiner will continue the examination and make the appropriate adjustments based on the determination of whether the worker is an employee or independent contractor:

Any discussion of a potential tax effect (computational adjustments, reclassifications of Schedule C expenses to employee business expenses, etc.) should be done at the conclusion of proceedings.

If the examiner determines that the taxpayer has properly converted the workers from independent contractors to employees and is currently treating the workers as employees, the examiner may discontinue the examination of the worker classification issue even if the taxpayer treated the workers as independent contractors in the year under examination.

The examiner will continue the examination of any other employment tax issues determined to be worthy of examination. If no other employment tax issues are present, the case may be closed "no change."

Even if a determination letter was issued to the taxpayer, the examiner must make an independent determination whether the taxpayer qualifies for section 530 relief and, if not, whether the workers are employees or independent contractors. The determination letter by itself cannot be used as the basis for denying section 530 relief or proposing additional tax based on a worker classification adjustment.

The examiner will request the information submitted by the taxpayer and worker that was used by the SS-8 Unit to make the determination from the SS-8 Unit.

When using an SS-8 determination as the basis for an examination, the examiner must ascertain whether:

If the examiner makes the same determination as in the determination letter, the examiner will follow normal procedures for proposing a worker classification adjustment. Classification Settlement Program (CSP) procedures must be followed if the requirements for a CSP are applicable. See IRM IRM 4.23.6, Classification Settlement Program. Failure to comply with a determination letter does not exclude the taxpayer from qualifying for a CSP offer.

The examiner may determine additional or different facts during the examination that lead the examiner to reach a conclusion that differs from the SS-8 determination. If the examiner disagrees with the SS-8 determination, the examiner will follow the procedures below for resolving the discrepancy and possible revocation of the determination letter.

In some cases, the examiner and the SS-8 Technician may not agree on the proper worker classification. In these situations, the examiner will prepare a memorandum to the SS-8 Unit that issued the determination letter explaining that the examiner conducted an audit of the firm (taxpayer) and made a different determination than the SS-8 determination letter. The memorandum should include the following information:

The examiner will attach a copy of the examination workpapers explaining the issue, facts, conclusion, and a copy of the original determination letter.

The SS-8 Unit will review the memorandum and additional information to determine whether it agrees with the examiner’s determination that the SS-8 determination letter should be revoked.

If the SS-8 Unit agrees with the examiner’s determination, the SS-8 Technician will notify the examiner of the concurrence and that the determination letter will be revoked. The examiner may then proceed with the case based on the examination results.

If the SS-8 Technician disagrees with the examiner’s determination, the SS-8 Technician will elevate the case to the SS-8 Program Coordinator for consideration. The SS-8 Program Coordinator will review the file, prepare a memorandum outlining the reasons for disagreement, and provide the examiner with the memorandum via email. If, after consideration of the memorandum, the examiner and his/her group manager still disagree with SS-8 Unit's result, the examiner, the examiner's group manager and the SS-8 Program Coordinator will hold a conference call and attempt to resolve the disagreement.

If the disagreement cannot be resolved, the examiner’s group manager will elevate the issue to the Employment Tax Policy Analyst responsible for worker classification issues.

The Employment Tax Policy Analyst will work with the SS-8 Program Coordinator to resolve the issue and will notify the examiner of the final determination. The examiner will then proceed with the case based on the resolution between the Policy Analyst and the SS-8 Program Coordinator.

Upon receipt of a request from an examiner for a revocation of an SS-8 determination, the SS-8 Technician will review the recommendation to determine if the technician agrees with the examiner and will record in the SS-8 case file the basis for a recommendation to revoke or uphold the SS-8 determination.

The SS-8 Technician will discuss the recommendation with the team manager or lead.

If the SS-8 Technician’s manager or lead agrees that the SS-8 determination should be revoked, the technician will notify the examiner of the concurrence with the recommendation and will provide the examiner with a copy of the revocation letter.

If the SS-8 Technician and manager or lead disagrees with the examiner’s recommendation, the file will be elevated to the SS-8 Program Coordinator for review. The SS-8 Program Coordinator will consider the matter. If they agree that the SS-8 determination should be upheld, they will prepare a memorandum outlining the areas of disagreement and share it with the SS-8 Tax Policy Analyst for discussion. If the SS-8 Tax Policy Analyst agrees with the memorandum, the SS-8 Program Coordinator will submit the memorandum to the examiner’s group manager for consideration.

If the examiner’s group manager and examiner still disagree with the SS-8 determination result after consideration of the memorandum, the examiner, the examiner's group manager, and the SS-8 Program Coordinator will hold a conference call and attempt to resolve the disagreement.

If the disagreement cannot be resolved, the group manager and examiner will elevate the matter to the Employment Tax Policy Analyst responsible for worker classification issues for final resolution.