§3509 Determination of Employer’s Liability for Certain Employment Taxes

Summary

When an employer treats a worker as not being an employee and fails to take out required payroll taxes, the employer’s tax bill for that worker is set by fixed percentages of the worker’s pay. For the tax in chapter 24 the bill is figured as if 1.5% of the wages had been withheld. For the taxes in subchapter A of chapter 21 the bill is figured as 20% of the amount that would normally be due. If the employer also failed to meet certain reporting rules (sections 6041(a), 6041A, or 6051) and the failure was not for reasonable cause, those rates are doubled to 3% and 40%, respectively. “Applicable requirements” means the reporting rules that would apply if the worker were treated as not an employee. The rule does not apply if the employer intentionally ignored the duty to withhold. The worker’s own tax bill is not changed by these calculations. The employer cannot force the worker to repay those determined amounts. Certain time-limit and relief rules (sections 3402(d) and 6521) do not apply. The rule also does not apply when the employer withheld the chapter 24 tax but failed to withhold the chapter 21 tax, or for certain individuals described in section 3121(d)(3).