IRS News Release  
October 30, 1996

New IRS Document Explains
Section 530 Relief Requirements

WASHINGTON - The Internal Revenue Service today released a simple, one-page document to help businesses understand their rights under the law when the IRS questions their classification of workers as independent contractors. The new document is the latest in a series of actions the IRS has recently taken to make it easier for businesses to work with the IRS on worker classification issues.

The new explanation, Independent Contractor or Employee?, sets out the three so-called section 530 relief requirements -- provisions contained in section 530 of the Revenue Act of 1978. In general, a business can be relieved of certain federal employment tax obligations if it:

  • had a reasonable basis for not treating workers as employees,
  • was consistent in its treatment of any similar workers as contractors, and
  • consistently filed required information returns with the IRS.

IRS tax examiners will provide the new explanation of section 530 relief requirements at the beginning of any inquiry into worker classification and will answer any questions about eligibility for this relief.

Commenting on the new document, Internal Revenue Commissioner Margaret Milner Richardson said, "Not only will this new explanation help businesses by explaining in simple terms a complicated provision of the law. It will also provide the consistency of treatment in worker classification matters that the business community and the IRS have long sought. It's a significant part of our on-going efforts to improve employment tax administration for all taxpayers."

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