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Updated: June 15, 2023
If you’ve reviewed the guidance and are still uncertain whether certain workers should be receiving a W-2 or a 1099-NEC — a decision based on whether they are classified as an employee or an independent contractor — you are in luck. The IRS has Form SS-8 to help. It’s used to help determine the status of a current worker for federal employment taxes and income tax withholding as either an employee, or as an independent contractor.
Note: Form SS-8 was last revised in May of 2014, and does not reference the new Form 1099-NEC, though the criteria of eligibility is the same. Keep in mind that the determination from an SS-8 does not decide your workers’ status at a state level. In addition, filing a Form SS-8 will not change the due date for your tax return, so if you are unsure of your worker’s status, file Form SS-8 early. You want the answer in time to file your taxes.
Let’s look at the details of the form.
Just a quick note here about the term “firm” as it relates to the IRS and specifically as it relates to Form SS-8. A firm is considered “any individual, business enterprise, organization, state, or other entity for which a worker has performed services. The firm may or may not have paid the worker directly for these services.”
Before we get into the specifics, the first thing you’ll want to do is download a copy of Form SS-8 and take a few moments to review it.
The form will help you make an accurate determination of your worker’s status for tax purposes. Send it to the IRS once completed, and they will use the information provided to make a formal determination of the worker’s status.
You’ll also need:
In addition to fields you’ll fill in, the IRS wants to make sure employers know that:
This section collects general information about your firm and your worker’s relationship to the firm. You’ll need to answer:
In addition, include details of any current or past litigation regarding the worker’s status. If no W-2 or 1099-NEC was issued, include information on the total compensation the worker received.
In this section, the IRS wants to understand the level of involvement or independence of the worker. You’ll need to tell them:
In this section, the IRS asks how financially invested the worker is in your business and vice versa. Who carries the brunt of the financial risk? Who buys supplies? Who determines prices for the customers?
Here are the questions you’ll need to answer:
Now the IRS will ask about benefits, noncompete agreements, work instructions, and terms for termination. Things you’ll need to address:
At this point, unless your worker is a salesperson or providing a service directly to customers, you will skip over Section V and sign the form.
If you are working with a salesperson or someone who delivers services directly to customers, answer the questions in Section V:
Once completed, you’ll need to file the Form with the IRS. Don’t forget to sign and date.
Just a few notes on how to file Form SS-8 once you’ve completed it:
SS-8 Determinations
PO Box 630, Stop 631
Holtsville NY 11742-0630
For more information on Form SS-8, visit the IRS website or consult your CPA or tax advisor.