When do you file Form 8919?

July 11, 2011

If you happen to work as an independent contractor, and you negotiated hard for that status with your employer, you need to follow some guidelines so neither of you lands on the wrong side of the law.  You will need a federal or state Tax ID because the IRS is looking harder at employers who report the earnings of independent contractor under social security numbers.  However, if you are harboring real doubts whether the work you do for your employer can be classified under that category you may try to avoid self-employment taxes by filing Form 8919. By doing this, you may be saving on paying the employer’s component of Social Security and Medicare taxes, but simultaneously blowing the whistle on your employer.

The IRS and Wage & Hour Division of the DOL use the 8919 filer data to identify possible offenders under the misclassification category. The audit process would also involve clearly revealing your information to the employer as the whistle-blower and you may possibly lose the opportunity to work for that particular employer ever again, either because they went bust or just would not consider taking you on again.

If the IRS investigation were to conclude that the employer misclassified the worker and failed to meet the employee reporting and withholding requirements, the liability for misclassification could include unpaid taxes as well as penalties for wage and hour laws and also overtime pay and may prove really expensive to the employer. There are cases where, in small businesses, an employer wishes to start withholding the taxes and meet the regulatory requirements but gets dissuaded by the employees who find that their pay check gets smaller (after the withholding of taxes) and quit the work or threaten to quit, putting the existence of the business itself at risk. Once caught in the dragnet, no employer can hope to prove a claim of innocence following industry practice and not attempting to dodge the payment of legitimate taxes.

The IRS encourages people who are in doubt about their classification to file Form SS-8, also known as Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.  The IRS will then decide the status of the worker and sends a determination letter. If the IRS states that you are an employee, you have to file Form 8919. Even if the IRS categorizes you as a Sec 530 employee or ‘not an independent contractor’ – the onus of filing Form 8919 and paying Self Employment taxes lies with you.

If a company, for whatever reasons, chooses to convert an employee into an Independent Contractor, to deliver the same or similar services (under the same supervision and control), the IRS treats the person as an employee only. An employee’s status may also determined by comparing the work, the timing, the direction and control with others classified as employees to realize that the IC classification will not stick and it is necessary to file Form 8919. It is also safe to file 8919, if any of your co-workers have filed SS-8 and received an official determination of their status as employees from the IRS. Even if you have filed Form 8919, and are still awaiting the official letter of determination of your status, the IRS advises you to file Form 8919.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.

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