Business FinancesQuestion 506 of 690
Under §530 of the Revenue Act of 1978 ("§530 safe harbor"), a contractor may continue treating workers as independent contractors for federal employment-tax purposes only if which of the following is true?
a.The workers each earn less than $600 per year
b.The workers sign a contract waiving employee status
c.The contractor pays them through a separate payroll service
d.The contractor has a reasonable basis for the classification, has consistently treated the workers (and similar workers) as contractors, and has filed all required Form 1099s
Explanation
§530 safe harbor protects employers from reclassification penalties only if all three prongs are met: (1) reasonable basis for treating workers as contractors, (2) substantive consistency in classifying similar workers, and (3) reporting consistency through timely 1099 filings.
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