What Is IRS Form SS-8?
IRS Form SS-8 Explained
IRS Form SS-8 is used to request that the Internal Revenue Service make a determination as to whether one or more of your workers should be classified as employees or independent contractors. It can be a tricky process, and the IRS is glad to figure it out for you if you just file Form SS-8.
The IRS uses a set of rules that measures evidence of control and independence in three categories: behavioral, financial, and type of relationship. Either a worker or an employer can file Form SS-8 and receive a determination on this question from the IRS.
What Is Form SS-8?
The information you provide to the IRS on Form SS-8 is used to differentiate independent contractors from employees.
Independent contractors provide services to more than one business and are considered to be self-employed. Employees also perform services for your company, but you control what will be done and how the worker will do it.
Businesses must withhold income taxes, Social Security tax, and Medicare tax from an employee's pay, and they must match the employee's Social Security and Medicare contributions. They don't have to withhold from payments to independent contractors because these individuals are in business for themselves.
You can be liable for these employment taxes for these individuals if your business classifies an employee as an independent contractor and you don't withhold and match them.
Misclassification usually happens when workers are classified as independent contractors, but the workers are actually determined to be employees.
Form SS-8 effectively asks the IRS whether you should withhold taxes from payments to certain workers because they're employees.
Who Uses Form SS-8?
Business owners must use Form SS-8 to request a determination, but they can only do so to resolve federal tax matters. You can't request a determination for proposed transactions or hypothetical situations.
Where to Get Form SS-8
Form SS-8 is available online on the IRS website. You can complete it online and print it out, or you can download a copy.
How to Fill Out Form SS-8
The key areas used to determine worker status are behavioral control, financial control, and type of relationship, and the form is broken down into sections to address each area. Each section covers a list of specific questions you must answer, such as:
- How did the worker apply for the job? Was it by bid, application, employment agency, or other?
- Describe the work performed by the worker.
- Explain why you believe the worker is an employee or independent contractor.
- Attach a copy of any written agreement you have with the worker.
- Describe work assignments.
- Explain the worker's daily routine.
- Who provides the worker's supplies and materials?
- Who provides any leased equipment that's used to perform services?
- Are the worker's expenses reimbursed?
- Cite the type of pay received by the worker. Is it salary, commission, hourly wage, piecework, or a lump sum?
- Do you pay on a regular schedule or does the worker invoice you for services performed?
- Do you make benefits available to the worker, such as paid vacations, sick pay, pensions, bonuses, or insurance?
- Do you have a non-compete agreement with the worker?
- Is the worker in a union?
- How do you present the worker to your customers?
Can Form SS-8 Be E-Filed?
Form SS-8 must be mailed to the IRS. It can't be transmitted electronically or by fax, and you must submit the original form, not a copy.
Where to Mail Form SS-8
Sign the completed Form SS-8 and send it to:
Internal Revenue Service
PO Box 630, Stop 631
Holtsville NY 11742-0630
Benefits of Form SS-8
The IRS will begin researching the situation when it receives your request, and it might reach out to you or to the worker for additional information. The entire process can take up to six months. The IRS will issue either a determination letter when it has made a decision, or an informational letter.
A determination letter is binding on the IRS. An informational letter is simply advisory and not binding.
Options for Relief
The IRS has set up a process under Section 530 of the Internal Revenue Code if it determines that you should have been treating a worker as an employee rather than an independent contractor and it penalizes you for not doing so. It includes three criteria for an exemption from paying back employment taxes:
- Reporting consistency
- Substantive consistency
- Reasonable basis
Section 530 relief is a separate process from an SS-8 determination.
The IRS also offers a program known as the Voluntary Classification Settlement Program (VCSP). It gives businesses an opportunity to reclassify workers as employees with partial relief from federal employment taxes. The business must meet certain eligibility requirements. It must file an application and enter into a closing agreement with the IRS.
- IRS Form SS-8 is a request to the IRS to determine whether a worker is an employee or an independent contractor.
- Classifying a worker as an independent contractor can be beneficial for businesses because they don’t have to pay employment taxes for this type of worker, but misclassification is against IRS rules.
- Financial penalties can apply if a business classifies an employee as an independent contractor and thus avoids paying employment taxes.
- The IRS will review the situation after receiving Form SS-8 and make the decision for businesses so they don't have to risk making the wrong decision.