Watchful Eye: You can't escape the IRS. If you make a small bookkeeping error, the IRS will know. One of the most common mistakes is misclassifying an employee as an independent contractor. If you're found guilty of this, you face severe penalties. But there is good news. The IRS offers a second chance for people who make mistakes.
Steps to Take:
-Fill out form 4670, "Request for Relief from Payment on Income Tax."
-Fill out Form 4669 "Statement of Payments Received"
-Provide Documents supporting your case
Friendly Note:
An employer will not owe employment taxes for misclassified workers if they meet all three requirements described in Sect. 530:
The employer must have reasonable basis for not treating the workers as employees
The employer must have treated the workers and any similar workers as independent contractors for all applicable periods
The employer must have filed Form 1099 MISC (Miscellaneous Income), for each worker, if required
Watch your Back: The Section 530 relief provision doesn't apply in some cases. If you're a worker who provides technical services for the client as a drafter, computer programmer, or engineer, or any other skilled worker in a similar field, the provision will not apply for you. So be careful!
And Remember: Don't be embarrassed about seeking help. No one ever said the IRS was easy. In fact, most people don't fully understand the IRS. To be honest with you, even the Commissioner doesn't know everything about the IRS. Make sure you get reliable, realistic help so that you have less to worry about.
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