Internal Revenue Code:Sec. 3509. Determination of employer's liability for certain employment taxes

From TaxAlmanac

Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle C - Employment Taxes
       CHAPTER 25 - GENERAL PROVISIONS RELATING TO EMPLOYMENT TAXES
     

Statute

    Sec. 3509. Determination of employer's liability for certain
        employment taxes
 
    (a) In general
      If any employer fails to deduct and withhold any tax under
    chapter 24 or subchapter A of chapter 21 with respect to any
    employee by reason of treating such employee as not being an
    employee for purposes of such chapter or subchapter, the amount of
    the employer's liability for -
      (1) Withholding taxes
        Tax under chapter 24 for such year with respect to such
      employee shall be determined as if the amount required to be
      deducted and withheld were equal to 1.5 percent of the wages (as
      defined in section 3401) paid to such employee.
      (2) Employee social security tax
        Taxes under subchapter A of chapter 21 with respect to such
      employee shall be determined as if the taxes imposed under such
      subchapter were 20 percent of the amount imposed under such
      subchapter without regard to this subparagraph.
    (b) Employer's liability increased where employer disregards
        reporting requirements
      (1) In general
        In the case of an employer who fails to meet the applicable
      requirements of section 6041(a), 6041A, or 6051 with respect to
      any employee, unless such failure is due to reasonable cause and
      not willful neglect, subsection (a) shall be applied with respect
      to such employee -
          (A) by substituting ''3 percent'' for ''1.5 percent'' in
        paragraph (1); and
          (B) by substituting ''40 percent'' for ''20 percent'' in
        paragraph (2).
      (2) Applicable requirements
        For purposes of paragraph (1), the term ''applicable
      requirements'' means the requirements described in paragraph (1)
      which would be applicable consistent with the employer's
      treatment of the employee as not being an employee for purposes
      of chapter 24 or subchapter A of chapter 21.
    (c) Section not to apply in cases of intentional disregard
      This section shall not apply to the determination of the
    employer's liability for tax under chapter 24 or subchapter A of
    chapter 21 if such liability is due to the employer's intentional
    disregard of the requirement to deduct and withhold such tax.
    (d) Special rules
      For purposes of this section -
      (1) Determination of liability
        If the amount of any liability for tax is determined under this
      section -
          (A) the employee's liability for tax shall not be affected by
        the assessment or collection of the tax so determined,
          (B) the employer shall not be entitled to recover from the
        employee any tax so determined, and
          (C) sections (FOOTNOTE 1) 3402(d) and section 6521 shall not
        apply.
       (FOOTNOTE 1) So in original.  Probably should be ''section''.
      (2) Section not to apply where employer deducts wage but not
          social security taxes
        This section shall not apply to any employer with respect to
      any wages if -
          (A) the employer deducted and withheld any amount of the tax
        imposed by chapter 24 on such wages, but
          (B) failed to deduct and withhold the amount of the tax
        imposed by subchapter A of chapter 21 with respect to such
        wages.
      (3) Section not to apply to certain statutory employees
        This section shall not apply to any tax under subchapter A of
      chapter 21 with respect to an individual described in subsection
      (d)(3) of section 3121 (without regard to whether such individual
      is described in paragraph (1) or (2) of such subsection).
 

Sources

    (Added Pub. L. 97-248, title II, Sec. 270(a), Sept. 3, 1982, 96
    Stat. 553; amended Pub. L. 100-647, title II, Sec. 2003(d), Nov.
    10, 1988, 102 Stat. 3598; Pub. L. 101-508, title V, Sec.
    5130(a)(4), Nov. 5, 1990, 104 Stat. 1388-289.)
 

Miscellaneous

                                 AMENDMENTS
      1990 - Subsec. (d)(3). Pub. L. 101-508 substituted ''subsection
    (d)(3)'' for ''subsection (d)(4)''.
      1988 - Subsec. (d)(3). Pub. L. 100-647 substituted ''subsection
    (d)(4)'' for ''subsection (d)(3)''.
                      EFFECTIVE DATE OF 1990 AMENDMENT
      Amendment by Pub. L. 101-508 effective as if included in the
    enactment of Pub. L. 100-647, Sec. 2003(d), see section 5130(b) of
    Pub. L. 101-508, set out as a note under section 1402 of this
    title.
                               EFFECTIVE DATE
      Section 270(c) of Pub. L. 97-248 provided that: ''The amendment
    made by this section (enacting this section) shall take effect on
    the date of the enactment of this Act (Sept. 3, 1982), except that
    such amendments shall not apply to any assessment made before
    January 1, 1983.''