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taxmap/pubs/p15a-000.htm#en_us_publink1000169439
Publication 15-A

Employer's 
Supplemental 
Tax Guide

rule

(Supplement to Publication 15
(Circular E),
Employer's Tax Guide)

What's New(p1)


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Future developments.(p1)
The IRS has created a page on IRS.gov for information about Publication 15-A, at
www.irs.gov/pub15a. Information about any future developments affecting Publication 15-A (such as legislation enacted after we release it) will be posted on that page.
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Social security and Medicare tax for 2012.(p1)
The employee tax rate for social security is 4.2% on wages paid and tips received before March 1, 2012. The employee tax rate for social security increases to 6.2% on wages paid and tips received after February 29, 2012. The employer tax rate for social security remains unchanged at 6.2%. The social security wage base limit is $110,100. The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2011. There is no wage base limit for Medicare tax.
Employers should implement the 4.2% employee social security tax rate as soon as possible, but not later than January 31, 2012. After implementing the 4.2% rate, employers should make an offsetting adjustment in a subsequent pay period to correct any overwithholding of social security tax as soon as possible, but not later than March 31, 2012.
Social security and Medicare taxes apply to the wages of household workers you pay $1,800 or more in cash or an equivalent form of compensation. Social security and Medicare taxes apply to election workers who are paid $1,500 or more in cash or an equivalent form of compensation.
EIC
At the time this publication was prepared for release, the rate for the employee's share of social security tax was 4.2% and scheduled to increase to 6.2% for wages paid after February 29, 2012. However, Congress was discussing an extension of the 4.2% employee tax rate for social security beyond February 29, 2012. Check for updates at www.irs.gov/pub15a.
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VOW to Hire Heroes Act of 2011.(p2)
On November 21, 2011, the President signed into law the VOW to Hire Heroes Act of 2011. This new law provides an expanded work opportunity tax credit to businesses that hire eligible unemployed veterans and, for the first time, also makes part of the credit available to tax-exempt organizations. Businesses claim the credit as part of the general business credit and tax-exempt organizations claim it against their payroll tax liability. The credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2013. More information about the credit against a tax-exempt organization's payroll tax liability will be available early in 2012 at
www.irs.gov/form5884c.
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FUTA tax rate.(p2)
The FUTA tax rate is 6.0% for 2012.
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Expiration of Attributed Tip Income Program (ATIP).(p2)
The Attributed Tip Income Program (ATIP) is scheduled to expire on December 31, 2011.
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Withholding allowance.(p2)
The 2012 amount for one withholding allowance on an annual basis is $3,800.
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Change of address.(p2)
Beginning in 2012, employers must use new Form 8822-B, Change of Address—Business, for any address change.

Reminders(p2)


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COBRA premium assistance credit.(p2)
The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. For more information, see COBRA premium assistance credit in Publication 15 (Circular E), Employer's Tax Guide.
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Federal tax deposits must be made by electronic funds transfer.(p2)
You must use electronic funds transfer to make all federal tax deposits. Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf. Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. EFTPS is a free service provided by the Department of Treasury. Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee.
For more information on making federal tax deposits, see How To Deposit in Publication 15 (Circular E). To get more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call 1-800-555-4477. Additional information about EFTPS is also available in Publication 966, The Secure Way to Pay Your Federal Taxes.
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Aggregate Form 941 filers.(p2)
Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941, Employer's QUARTERLY Federal Tax Return. Aggregate Forms 941 can only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS.
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Aggregate Form 940 filers.(p2)
Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Aggregate Forms 940 may only be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS.
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Employers can choose to file Form 941 instead of Form 944.(p2)
If you previously were notified to file Form 944, Employer's ANNUAL Federal Tax Return, but want to file quarterly Forms 941 to report your social security, Medicare and withheld federal income taxes, you must first contact the IRS to request to file Forms 941, rather than Form 944. See Rev. Proc. 2009-51, 2009-45 I.R.B 625, for the procedures for employers who previously were notified to file Form 944 to request to file Forms 941 instead. In addition, Rev. Proc. 2009-51 provides the procedures for employers to request to file Form 944. Rev. Proc. 2009-51 is available at www.irs.gov/irb/2009-45_IRB/ar12.html. Also see the Instructions for Form 944.
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Additional employment tax information.(p2)
Visit the IRS website at www.irs.gov/businesses and click on the
Employment Taxes link.
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Telephone help.(p2)
You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933.
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Help for people with disabilities.(p3)
Telephone help is available using TTY/TDD equipment. You can call 1-800-829-4059 with your tax question or to order forms and publications. You may also use this number for problem resolution assistance.
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Furnishing Form W-2 to employees electronically.(p3)
You may set up a system to furnish Form W-2, Wage and Tax Statement, electronically. Each employee participating must consent (either electronically or by paper document) to receive his or her Form W-2 electronically, and you must notify the employee of all hardware and software requirements to receive the form. You may not send a Form W-2 electronically to any employee who does not consent or who has revoked consent previously provided.
To furnish Forms W-2 electronically, you must meet the following disclosure requirements and provide a clear and conspicuous statement of each requirement to your employees.
  • The employee must be informed that he or she will receive a paper Form W-2 if consent is not given to receive it electronically.
  • The employee must be informed of the scope and duration of the consent.
  • The employee must be informed of any procedure for obtaining a paper copy of his or her Form W-2 and whether or not the request for a paper statement is treated as a withdrawal of his or her consent to receiving his or her Form W-2 electronically.
  • The employee must be notified about how to withdraw a consent and the effective date and manner by which the employer will confirm the withdrawn consent. The employee must also be notified that the withdrawn consent does not apply to the previously issued Forms W-2.
  • The employee must be informed about any conditions under which electronic Forms W-2 will no longer be furnished (for example, termination of employment).
  • The employee must be informed of any procedures for updating his or her contact information that enables the employer to provide electronic Forms W-2.
  • The employer must notify the employee of any changes to the employer's contact information.
You must furnish electronic Forms W-2 by the same due date as the paper Forms W-2. For more information on furnishing Form W-2 to employees electronically, see Regulations section 31.6051-1(j).
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Electronic filing and payment.(p3)
Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier.
Spend less time and worry on taxes and more time running your business. Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit.
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Electronic submission of Forms W-4, W-4P, W-4S and W-4V.(p3)
You may set up a system to electronically receive any or all of the following forms (and their Spanish versions, if available) from an employee or payee.
  • Form W-4, Employee's Withholding Allowance Certificate.
  • Form W-4P, Withholding Certificate for Pension or Annuity Payments.
  • Form W-4S, Request for Federal Income Tax Withholding From Sick Pay.
  • Form W-4V, Voluntary Withholding Request.
For each form that you establish an electronic submission system for, you must meet each of the following five requirements.
  1. The electronic system must ensure that the information received by the payer is the information sent by the payee. The system must document all occasions of user access that result in a submission. In addition, the design and operation of the electronic system, including access procedures, must make it reasonably certain that the person accessing the system and submitting the form is the person identified on the form.
  2. The electronic system must provide exactly the same information as the paper form.
  3. The electronic submission must be signed with an electronic signature by the payee whose name is on the form. The electronic signature must be the final entry in the submission.
  4. Upon request, you must furnish a hard copy of any completed electronic form to the IRS and a statement that, to the best of the payer's knowledge, the electronic form was submitted by the named payee. The hard copy of the electronic form must provide exactly the same information as, but need not be a facsimile of, the paper form. For Form W-4, the signature must be under penalty of perjury, and must contain the same language that appears on the paper version of the form. The electronic system must inform the employee that he or she must make a declaration contained in the perjury statement and that the declaration is made by signing the Form W-4.
  5. You must also meet all recordkeeping requirements that apply to the paper forms.
For more information, see:
  • Regulations sections 31.3402(f)(5)-1(c) (for Form W-4), and
  • Announcement 99-6 (for Forms W-4P, W-4S, and W-4V). You can find Announcement 99-6 on page 24 of Internal Revenue Bulletin 1999-4 at
    www.irs.gov/pub/irs-irbs/irb99-04.pdf.
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Photographs of missing children.(p4)
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

taxmap/pubs/p15a-000.htm#TXMP4e2f2631Introduction

This publication supplements Publication 15 (Circular E). It contains specialized and detailed employment tax information supplementing the basic information provided in Publication 15 (Circular E). This publication also contains tables for withholding on distributions of Indian gaming profits to tribal members. Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment of various types of noncash compensation.
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Ordering publications and forms.(p4)

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See Quick and Easy Access to IRS Tax Help and Tax Products, located at the end of this publication, for information on how to obtain forms and publications.

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Useful items

You may want to see:


Publication
 15-B Employer's Tax Guide to Fringe Benefits
 505 Tax Withholding and Estimated Tax
 515 Withholding of Tax on Nonresident Aliens and Foreign Entities
 583 Starting a Business and Keeping Records
 1635 Understanding Your EIN
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Comments and suggestions.(p4)

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We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:


Internal Revenue Service
Business Forms and Publications Branch
SE:W:CAR:MP:T:B
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224


We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at taxforms@irs.gov. Please put "Publication 15-A" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.
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1. Who Are Employees?(p4)

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Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be:
This discussion explains these four categories. A later discussion, Employee or Independent Contractor in section 2, points out the differences between an independent contractor and an employee and gives examples from various types of occupations.
If an individual who works for you is not an employee under the common-law rules (see section 2), you generally do not have to withhold federal income tax from that individual's pay. However, in some cases you may be required to withhold under the backup withholding requirements on these payments. See Publication 15 (Circular E) for information on backup withholding.
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Independent Contractors(p4)

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People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case. The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.
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Common-Law Employees(p4)

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Under common-law rules, anyone who performs services for you is your employee if you have the right to control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed. For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2.
If you have an employer-employee relationship, it makes no difference how it is labeled. The substance of the relationship, not the label, governs the worker's status. It does not matter whether the individual is employed full time or part time.
For employment tax purposes, no distinction is made between classes of employees. Superintendents, managers, and other supervisory personnel are all employees. An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. A director of a corporation is not an employee with respect to services performed as a director.
You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. However, the wages of certain employees may be exempt from one or more of these taxes. See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4).
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Leased employees.(p5)

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Under certain circumstances, a firm furnishing workers to other firms is the employer of those workers for employment tax purposes. For example, a temporary staffing service may provide the services of secretaries, nurses, and other similarly trained workers to its clients on a temporary basis.
The staffing service enters into contracts with the clients under which the clients specify the services to be provided and a fee is paid to the staffing service for each individual furnished. The staffing service has the right to control and direct the worker's services for the client, including the right to discharge or reassign the worker. The staffing service hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business.
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Additional information.(p5)

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For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, see Publication 15 (Circular E) or Publication 51 (Circular A), Agricultural Employer's Tax Guide.
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Statutory Employees(p5)

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If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as "statutory employees") for certain employment tax purposes. This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes.
  1. A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.
  2. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
  3. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.
  4. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. The work performed for you must be the salesperson's principal business activity. See Salesperson in section 2.
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Social security and Medicare taxes.(p5)

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Withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply.
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Federal unemployment (FUTA) tax.(p5)

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For FUTA tax, the unemployment tax paid under the Federal Unemployment Tax Act, the term "employee" means the same as it does for social security and Medicare taxes, except that it does not include statutory employees defined above in categories 2 and 3. Any individual who is a statutory employee under category 1 or 4, earlier, is also an employee for FUTA tax purposes and subject to FUTA tax.
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Income tax.(p5)

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Do not withhold federal income tax from the wages of statutory employees.
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Reporting payments to statutory employees.(p5)

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Furnish Form W-2 to a statutory employee, and check "Statutory employee" in box 13. Show your payments to the employee as "other compensation" in box 1. Also, show social security wages in box 3, social security tax withheld in box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. He or she reports earnings as a statutory employee on line 1 of Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. A statutory employee's business expenses are deductible on Schedule C (Form 1040) or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees.
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Statutory Nonemployees(p6)

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There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if:
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Direct sellers.(p6)

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Direct sellers include persons falling within any of the following three groups.
  1. Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment.
  2. Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment.
  3. Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution).
Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting.
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Licensed real estate agents.(p6)

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This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output.
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Companion sitters.(p6)

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Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes.
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Misclassification of Employees(p6)

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Consequences of treating an employee as an independent contractor.(p6)

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If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you are liable for employment taxes for that worker (the relief provision, discussed next, will not apply). See section 2 in Publication 15 (Circular E) for more information.
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Relief provision.(p6)

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If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977.
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Technical service specialists.(p6)
This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.
This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. The common-law rules control whether the specialist is treated as an employee or an independent contractor. However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision.
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Test proctors and room supervisors.(p6)
The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual:
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Voluntary Classification Settlement Program (VCSP).(p6)

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Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. The employer cannot currently be under examination by the IRS, Department of Labor, or a state government agency, concerning the classification of workers. To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). For more information, visit the IRS website at www.irs.gov/form8952.