Using Form SS-8 to Apply for Worker Status Determination
Determination of Employee or Contractor Status
IRS Form SS-8 is used to request a determination from the IRS on the status of workers, to determine if they are employees or independent contractors.
Many businesses have workers who may be classified incorrectly. Usually, this misclassification happens when workers are classified as independent contractors, but the workers may be employees instead. It is important to know whether a worker is an employee or an independent contractor, mainly because of payroll taxes.
If a worker is determined to be an employee
How Form SS-8 Works
The IRS reviews these instances of possible misclassification on a case-by-case basis and issues a determination. You cannot use this form for hypothetical or proposed situations. Either a business or a worker may file Form SS-8 "to request a determination of the status of a worker under the common law rules for purposes of federal employment taxes and income tax withholding. Generally, under the common law rules a worker is assumed to be an employee unless the IRS determines otherwise.
Information Needed to Determine Worker Status
The key areas used to determine worker status are behavioral control, financial control, and type of relationship. Here is a list of key information you will need to compile in order to complete this form:
- How did the worker obtain the job (bid, application, employment agency, or other)
- Description of the work done by the worker
- Explanation of why you believe the worker is an employee or independent contractor
- Attach a copy of any written agreement
- Specific questions to determine behavioral control; for example:
- Training and instructions
- Work assignments
- Problems and complaints
- Daily routine
- Substitutes or helpers
- Specific questions to determine financial control; for example:
- Who provides supplies and materials
- Who provides leased equipment
- Are worker expenses reimbursed
- Type of pay received (salary, commission, hourly wage, piecework, lump sum, or other
- Drawing/advance account
- Who does the customer pay
- Economic loss/financial risk for worker
- Specific questions to determine the relationship between worker and firm; for example:
- Benefits available to worker, like paid vacations, sick pay, pensions, bonuses, insurance
- Penalties for termination of relationship
- Presence of non-compete agreement
- Is worker in a union
- Who provides materials, patterns, instructions
- How the firm represents the worker to its customers
The Process for Form SS-8
A worker or employer can file Form SS-8 and receive a determination from the IRS. When the IRS receives the request, it will begin research and may come back to the firm and worker for further information. At the end of the process (which might take up to six months), the IRS will either (a) issue a determination letter, which is binding on the IRS, or (b) issue an informational letter, which is advisory but not binding.
Where to File Form SS-8
The IRS has two filing locations, depending on the location of the firm.
For firms located in states west of the Mississippi (including Illinois) the location is:
Internal Revenue Service, SS-8 Determinations, PO Box 630, Stop 631, Holtsville NY 11742-0630
For firms located east of the Mississippi, the filing location is:
Internal Revenue Service, SS-8 Determinations, 40 Lakemont Road, Newport VT 05855-1556
Form SS-8 Determination vs Section 530 Relief
If the IRS determines that a business should have been treating workers as employees rather than independent contractors, there is a possible way to avoid paying back employment taxes. The IRS has set up a process under Section 530 of the Internal Revenue Code with three criteria for an exemption from this payment. Section 530 relief is a separate process from an SS-8 determination.