Exhibit 1-3
DEPARTMENT OF THE TREASURY •INTERNAL REVENUE SERVICE
INDEPENDENT CONTRACTOR OR EMPLOYEE?
SECTION 530 RELIEF REQUIREMENTS
SECTION 530 PROVIDES
BUSINESSES WITH RELIEF
FROM FEDERAL
EMPLOYMENT TAX
OBLIGATIONS IF CERTAIN
REQUIREMENTS ARE MET
.
Your business has been selected
for an employment tax examination
to determine whether you correctly
treated certain workers as
independent contractors. However,
you will not owe employment taxes
for these workers, if you meet the
relief requirements described
below. If you do not meet these
relief requirements, the IRS will
need to determine whether the
workers are independent contractors
or employees and whether you owe
employment taxes for those
workers.
Section 530 Relief
Requirements:
To receive relief, you must meet all
three of the following requirements:
I. Reasonable Basis
First, you had a reasonable basis for
not treating the workers as
employees. To establish that you
had a reasonable basis for not
treating the workers as employees,
you can show that:
You reasonably relied on a court
case about Federal taxes or a ruling
issued to you by the IRS; or
Your business was audited by the
IRS at a time when you treated
similar workers as independent
contractors and the IRS did not
reclassify those workers as
employees; or
You treated the workers as
independent contractors because
you knew that was how a
significant segment of your industry
treated similar workers; or
You relied on some other
reasonable basis. For example, you
relied on the advice of a business
lawyer or accountant who knew the
facts about your business.
If you did not have reasonable
basis for treating the workers as
independent contractors, you do not
meet the relief requirements.
II. Substantive Consistency
In addition, you (and any
predecessor business) must have
treated the workers, and any similar
workers, as independent
contractors. If you treated similar
workers as employees, this relief
provision is not available.
III. Reporting Consistency
Finally, you must have filed Form
1099-MISC for each worker, unless
the worker earned less than $600.
Relief is not available for any year
you did not file the required Forms
1099-MISC. If you filed the
required Forms 1099-MISC for
some workers, but not for others,
relief is not available for the
workers for whom you did not file
Forms 1099-MISC.
The IRS examiner will answer any
questions you may have about your
eligibility for this relief.
Department of the Treasury
Internal Revenue Service
Publication 1976 (9-96)
Catalog Number 22927M