Internal Revenue Code:Sec. 3401. Definitions
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
Statute
Sec. 3401. Definitions
(a) Wages
For purposes of this chapter, the term ''wages'' means all
remuneration (other than fees paid to a public official) for
services performed by an employee for his employer, including the
cash value of all remuneration (including benefits) paid in any
medium other than cash; except that such term shall not include
remuneration paid -
(1) for active service performed in a month for which such
employee is entitled to the benefits of section 112 (relating to
certain combat zone compensation of members of the Armed Forces
of the United States) to the extent remuneration for such service
is excludable from gross income under such section; or
(2) for agricultural labor (as defined in section 3121(g))
unless the remuneration paid for such labor is wages (as defined
in section 3121(a)); or
(3) for domestic service in a private home, local college club,
or local chapter of a college fraternity or sorority; or
(4) for service not in the course of the employer's trade or
business performed in any calendar quarter by an employee, unless
the cash remuneration paid for such service is $50 or more and
such service is performed by an individual who is regularly
employed by such employer to perform such service. For purposes
of this paragraph, an individual shall be deemed to be regularly
employed by an employer during a calendar quarter only if -
(A) on each of some 24 days during such quarter such
individual performs for such employer for some portion of the
day service not in the course of the employer's trade or
business; or
(B) such individual was regularly employed (as determined
under subparagraph (A)) by such employer in the performance of
such service during the preceding calendar quarter; or
(5) for services by a citizen or resident of the United States
for a foreign government or an international organization; or
(6) for such services, performed by a nonresident alien
individual, as may be designated by regulations prescribed by the
Secretary; or
((7) Repealed. Pub. L. 89-809, title I, Sec. 103(k), Nov. 13,
1966, 80 Stat. 1554)
(8)(A) for services for an employer (other than the United
States or any agency thereof) -
(i) performed by a citizen of the United States if, at the
time of the payment of such remuneration, it is reasonable to
believe that such remuneration will be excluded from gross
income under section 911; or
(ii) performed in a foreign country or in a possession of the
United States by such a citizen if, at the time of the payment
of such remuneration, the employer is required by the law of
any foreign country or possession of the United States to
withhold income tax upon such remuneration; or
(B) for services for an employer (other than the United States
or any agency thereof) performed by a citizen of the United
States within a possession of the United States (other than
Puerto Rico), if it is reasonable to believe that at least 80
percent of the remuneration to be paid to the employee by such
employer during the calendar year will be for such services; or
(C) for services for an employer (other than the United States
or any agency thereof) performed by a citizen of the United
States within Puerto Rico, if it is reasonable to believe that
during the entire calendar year the employee will be a bona fide
resident of Puerto Rico; or
(D) for services for the United States (or any agency thereof)
performed by a citizen of the United States within a possession
of the United States to the extent the United States (or such
agency) withholds taxes on such remuneration pursuant to an
agreement with such possession; or
(9) for services performed by a duly ordained, commissioned, or
licensed minister of a church in the exercise of his ministry or
by a member of a religious order in the exercise of duties
required by such order; or
(10)(A) for services performed by an individual under the age
of 18 in the delivery or distribution of newspapers or shopping
news, not including delivery or distribution to any point for
subsequent delivery or distribution; or
(B) for services performed by an individual in, and at the time
of, the sale of newspapers or magazines to ultimate consumers,
under an arrangement under which the newspapers or magazines are
to be sold by him at a fixed price, his compensation being based
on the retention of the excess of such price over the amount at
which the newspapers or magazines are charged to him, whether or
not he is guaranteed a minimum amount of compensation for such
services, or is entitled to be credited with the unsold
newspapers or magazines turned back; or
(11) for services not in the course of the employer's trade or
business, to the extent paid in any medium other than cash; or
(12) to, or on behalf of, an employee or his beneficiary -
(A) from or to a trust described in section 401(a) which is
exempt from tax under section 501(a) at the time of such
payment unless such payment is made to an employee of the trust
as remuneration for services rendered as such employee and not
as a beneficiary of the trust; or
(B) under or to an annuity plan which, at the time of such
payment, is a plan described in section 403(a); or
(C) for a payment described in section 402(h)(1) and (2) if,
at the time of such payment, it is reasonable to believe that
the employee will be entitled to an exclusion under such
section for payment; or
(D) under an arrangement to which section 408(p) applies; or
(E) under or to an eligible deferred compensation plan which,
at the time of such payment, is a plan described in section
457(b) which is maintained by an eligible employer described in
section 457(e)(1)(A), (FOOTNOTE 1) or
(FOOTNOTE 1) So in original. The comma probably should be a
semicolon.
(13) pursuant to any provision of law other than section 5(c)
or 6(1) of the Peace Corps Act, for service performed as a
volunteer or volunteer leader within the meaning of such Act; or
(14) in the form of group-term life insurance on the life of an
employee; or
(15) to or on behalf of an employee if (and to the extent that)
at the time of the payment of such remuneration it is reasonable
to believe that a corresponding deduction is allowable under
section 217 (determined without regard to section 274(n)); or
(16)(A) as tips in any medium other than cash;
(B) as cash tips to an employee in any calendar month in the
course of his employment by an employer unless the amount of such
cash tips is $20 or more; (FOOTNOTE 2)
(FOOTNOTE 2) So in original. Probably should be followed by
''or''.
(17) for service described in section 3121(b)(20); (FOOTNOTE 2)
(18) for any payment made, or benefit furnished, to or for the
benefit of an employee if at the time of such payment or such
furnishing it is reasonable to believe that the employee will be
able to exclude such payment or benefit from income under section
127, 129, or 134(b)(4); (FOOTNOTE 2)
(19) for any benefit provided to or on behalf of an employee if
at the time such benefit is provided it is reasonable to believe
that the employee will be able to exclude such benefit from
income under section 74(c), 117, 118(f)(4), or 132; (FOOTNOTE 2)
(20) for any medical care reimbursement made to or for the
benefit of an employee under a self-insured medical reimbursement
plan (within the meaning of section 105(h)(6));
(21) for any payment made to or for the benefit of an employee
if at the time of such payment it is reasonable to believe that
the employee will be able to exclude such payment from income
under section 106(b); or
(22) any payment made to or for the benefit of an employee
if at the time of such payment it is reasonable to believe that
the employee will be able to exclude such payment from income
under section 106(d).
The term `wages' includes any amount includible in gross
income of an employee under section 409A and payment of such
amount shall be treated as having been made in the taxable year
in which the amount is so includible.
(b) Payroll period
For purposes of this chapter, the term ''payroll period'' means a
period for which a payment of wages is ordinarily made to the
employee by his employer, and the term ''miscellaneous payroll
period'' means a payroll period other than a daily, weekly,
biweekly, semimonthly, monthly, quarterly, semiannual or annual
payroll period.
(c) Employee
For purposes of this chapter, the term ''employee'' includes an
officer, employee, or elected official of the United States, a
State, or any political subdivision thereof, or the District of
Columbia, or any agency or instrumentality of any one or more of
the foregoing. The term ''employee'' also includes an officer of a
corporation.
(d) Employer
For purposes of this chapter, the term ''employer'' means the
person for whom an individual performs or performed any service, of
whatever nature, as the employee of such person, except that -
(1) if the person for whom the individual performs or performed
the services does not have control of the payment of the wages
for such services, the term ''employer'' (except for purposes of
subsection (a)) means the person having control of the payment of
such wages, and
(2) in the case of a person paying wages on behalf of a
nonresident alien individual, foreign partnership, or foreign
corporation, not engaged in trade or business within the United
States, the term ''employer'' (except for purposes of subsection
(a)) means such person.
(e) Number of withholding exemptions claimed
For purposes of this chapter, the term ''number of withholding
exemptions claimed'' means the number of withholding exemptions
claimed in a withholding exemption certificate in effect under
section 3402(f), or in effect under the corresponding section of
prior law, except that if no such certificate is in effect, the
number of withholding exemptions claimed shall be considered to be
zero.
(f) Tips
For purposes of subsection (a), the term ''wages'' includes tips
received by an employee in the course of his employment. Such
wages shall be deemed to be paid at the time a written statement
including such tips is furnished to the employer pursuant to
section 6053(a) or (if no statement including such tips is so
furnished) at the time received.
((g) Repealed. Pub. L. 101-140, title II, Sec. 203(a)(2), Nov. 8,
1989, 103 Stat. 830)
(g) Crew leader rules to apply
Rules similar to the rules of section 3121(o) shall apply for
purposes of this chapter.
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 455; Aug. 9, 1955, ch. 681, 69
Stat. 616; Pub. L. 87-256, Sec. 110(g)(1), Sept. 21, 1961, 75 Stat.
537; Pub. L. 87-293, title II, Sec. 201(c), Sept. 22, 1961, 75
Stat. 625; Pub. L. 87-792, Sec. 7(l), Oct. 10, 1962, 76 Stat. 830;
Pub. L. 88-272, title II, Sec. 204(b), 213(c), Feb. 26, 1964, 78
Stat. 36, 52; Pub. L. 89-97, title III, Sec. 313(d)(1), (2), July
30, 1965, 79 Stat. 383, 384; Pub. L. 89-809, title I, Sec. 103(k),
Nov. 13, 1966, 80 Stat. 1554; Pub. L. 92-279, Sec. 2, Apr. 26,
1972, 86 Stat. 125; Pub. L. 93-406, title II, Sec. 2002(g)(7),
Sept. 2, 1974, 88 Stat. 970; Pub. L. 94-455, title XII, Sec.
1207(e)(1)(C), title XV, Sec. 1501(b)(7), title XIX, Sec. 1903(c),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1707, 1736, 1810, 1834; Pub.
L. 95-600, title I, Sec. 164(b)(1), Nov. 6, 1978, 92 Stat. 2813;
Pub. L. 95-615, Sec. 207(a), Nov. 8, 1978, 92 Stat. 3108; Pub. L.
96-222, title I, Sec. 103(a)(13)(A), Apr. 1, 1980, 94 Stat. 213;
Pub. L. 97-34, title I, Sec. 112(b)(5), 124(e)(2)(A), title III,
Sec. 311(h)(6), Aug. 13, 1981, 95 Stat. 195, 200, 282; Pub. L.
97-448, title I, Sec. 103(c)(12)(B), Jan. 12, 1983, 96 Stat. 2377;
Pub. L. 98-369, div. A, title IV, Sec. 491(d)(38), title V, Sec.
531(d)(4), July 18, 1984, 98 Stat. 851, 885; Pub. L. 99-514, title
I, Sec. 122(e)(4), title XII, Sec. 1272(c), Oct. 22, 1986, 100
Stat. 2112, 2594; Pub. L. 100-647, title I, Sec.
1001(g)(4)(B)(iii), 1011(f)(9), 1011B(a)(22)(D), (33), Nov. 10,
1988, 102 Stat. 3352, 3463, 3486, 3488; Pub. L. 101-140, title II,
Sec. 203(a)(2), Nov. 8, 1989, 103 Stat. 830; Pub. L. 101-239, title
VII, Sec. 7631(a), (b), Dec. 19, 1989, 103 Stat. 2378; Pub. L.
101-508, title XI, Sec. 11703(f)(1), Nov. 5, 1990, 104 Stat.
1388-517; Pub. L. 104-117, Sec. 1(c), Mar. 20, 1996, 110 Stat. 828;
Pub. L. 104-188, title I, Sec. 1421(b)(8)(D), 1704(t)(4)(C), Aug.
20, 1996, 110 Stat. 1798, 1887; Pub. L. 104-191, title III, Sec.
301(c)(2)(C), Aug. 21, 1996, 110 Stat. 2049; Pub. L. 105-206, title
VI, Sec. 6023(14), (15), July 22, 1998, 112 Stat. 825; Pub. L.
107-16, title VI, Sec. 641(a)(1)(D)(i), June 7, 2001, 115 Stat.
119.)
Amendment of Section
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
References in Text
REFERENCES IN TEXT
Sections 5(c) and 6(1) of the Peace Corps Act, referred to in
subsec. (a)(13), are classified to sections 2504(c) and 2505(1),
respectively, of Title 22, Foreign Relations and Intercourse.
Miscellaneous
AMENDMENTS
2004 - Pub. L. 108-357, Sec. 885(b)(2). Section 3401(a) (defining wages)
is amended by adding at the end the following flush sentence:
``The term `wages' includes any amount includible in gross
income of an employee under section 409A and payment of such
amount shall be treated as having been made in the taxable year
in which the amount is so includible.
2004 - Pub. L.108-357, Sec. 320(b)(4). Sec. 3401(a)(19)is amended
by inserting ``108(f)(4),'' after ``74(c),''.
2003 - Subsec.1201(d)(2)(C), Pub. L. 108-137 amended Sec.
3401(a) by adding (22) for Health Savings Accounts.
2003 - Subsec.(a)(18). Pub.L. 108-121, Sec. 106, amends
to add reference to 26 USC 134(b)(4).
2001 - Subsec. (a)(12)(E). Pub. L. 107-16, Sec. 641(a)(1)(D)(i),
901, temporarily added subpar. (E). See Effective and Termination
Dates of 2001 Amendment note below.
1998 - Subsec. (a)(19), (21). Pub. L. 105-206 inserted ''for''
after par. designation.
1996 - Subsec. (a)(1). Pub. L. 104-188, Sec. 1704(t)(4)(C),
substituted ''combat zone compensation'' for ''combat pay''.
Pub. L. 104-117 inserted before semicolon ''to the extent
remuneration for such service is excludable from gross income under
such section''.
Subsec. (a)(12)(D). Pub. L. 104-188, Sec. 1421(b)(8)(D), added
subpar. (D).
Subsec. (a)(21). Pub. L. 104-191 added par. (21).
1990 - Subsec. (a)(20). Pub. L. 101-508 added par. (20).
1989 - Subsec. (a)(2). Pub. L. 101-239, Sec. 7631(a), amended
par. (2) generally. Prior to amendment, par. (2) read as follows:
''for agricultural labor (as defined in section 3121(g)); or''.
Subsec. (g). Pub. L. 101-140 amended this section to read as if
amendments by Pub. L. 100-647, Sec. 1011B(a)(22)(D), had not been
enacted, see 1988 Amendment note below.
Subsec. (h). Pub. L. 101-239, Sec. 7631(b), added subsec. (h).
1988 - Subsec. (a)(12)(C). Pub. L. 100-647, Sec. 1011(f)(9),
substituted ''section 402(h)(1) and (2)'' for ''section 219'' and
''an exclusion'' for ''a deduction''.
Subsec. (a)(15). Pub. L. 100-647, Sec. 1001(g)(4)(B)(iii),
inserted ''(determined without regard to section 274(n))'' after
''section 217''.
Subsec. (a)(19), (20). Pub. L. 100-647, Sec. 1011B(a)(33),
redesignated par. (20) as (19) and struck out former par. (19)
which excluded medical care reimbursement made to or for benefit of
employee under self-insured medical reimbursement plan.
Subsec. (g). Pub. L. 100-647, Sec. 1011B(a)(22)(D), added subsec.
(g) relating to benefits provided under certain employee benefit
plans.
1986 - Subsec. (a)(8)(D). Pub. L. 99-514, Sec. 1272(c), added
subpar. (D).
Subsec. (a)(20). Pub. L. 99-514, Sec. 122(e)(4), inserted
reference to section 74(c).
1984 - Subsec. (a). Pub. L. 98-369, Sec. 531(d)(4)(A), inserted
''(including benefits)'' in introductory provisions.
Subsec. (a)(12). Pub. L. 98-369, Sec. 491(d)(38), struck out
subpar. (C) which provided: ''under or to a bond purchase plan
which, at the time of such payment, is a qualified bond purchase
plan described in section 405(a);'' and redesignated subpar. (D) as
(C).
Subsec. (a)(20). Pub. L. 98-369, Sec. 531(d)(4)(B), added par.
(20).
1983 - Subsec. (a)(12)(D). Pub. L. 97-448 substituted ''section
219'' for ''section 219(a)''.
1981 - Subsec. (a)(12)(D). Pub. L. 97-34, Sec. 311(h)(6),
substituted ''section 219(a)'' for ''section 219(a) or 220(a)''.
Subsec. (a)(18). Pub. L. 97-34, Sec. 124(e)(2)(A), substituted
''section 127 or 129'' for ''section 127''.
Pub. L. 97-34, Sec. 112(b)(5), redesignated par. (19) as (18).
Former par. (18), relating to remuneration paid to or on behalf of
an employee if (and to the extent that) at the time of the payment
of such remuneration it was reasonable to believe that a
corresponding deduction was allowable under section 913 (relating
to deduction for certain expenses of living abroad), was struck
out.
Subsec. (a)(19), (20). Pub. L. 97-34, Sec. 112(b)(5),
redesignated par. (20) as (19). Former par. (19) redesignated (18).
1980 - Subsec. (a)(18) to (20). Pub. L. 96-222 redesignated par.
(18), added by Pub. L. 95-600, as (19), in par. (19) as so
redesignated, substituted ''section 127; or'' for ''section 124.'',
and added par. (20).
1978 - Subsec. (a)(18). Pub. L. 95-615 added par. (18) relating
to payments or benefits excludable from income under section 124.
Pub. L. 95-600 added par. (18) relating to remuneration for which
a corresponding deduction is allowable under section 913.
1976 - Subsec. (a)(6). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out ''or his delegate'' after ''Secretary''.
Subsec. (a)(12)(D). Pub. L. 94-455, Sec. 1501(b)(7), inserted
''or 220(a)'' after ''section 219(a)''.
Subsec. (a)(17). Pub. L. 94-455, Sec. 1207(e)(1)(C), added par.
(17).
Subsec. (c). Pub. L. 94-455, Sec. 1903(c), struck out
''Territory'' after ''a State''.
1974 - Subsec. (a)(12)(D). Pub. L. 93-406 added subpar. (D).
1972 - Subsec. (a)(1). Pub. L. 92-279 struck out ''as a member of
the Armed Forces of the United States'' after ''active service'',
substituted ''employee'' for ''member'', and parenthetical text
''(relating to certain combat pay of members of the Armed Forces of
the United States)''.
1966 - Subsec. (a)(6), (7). Pub. L. 89-809, Sec. 103(k), struck
out par. (6) dealing with services performed by nonresident alien
individuals other than residents of contiguous countries who enter
and leave the United States at frequent intervals, residents of
Puerto Rico if such services are performed as an employee of the
United States or any agency thereof, or individuals temporarily
present in the United States as nonimmigrants under certain
conditions, redesignated par. (7) as (6), and in par (6) as so
redesignated, struck out ''who is a resident of a contiguous
country and who enters and leaves the United States at frequent
intervals'' after ''nonresident alien individual''.
1965 - Subsec. (a)(16). Pub. L. 89-97, Sec. 313(d)(2), added par.
(16).
Subsec. (f). Pub. L. 89-97, Sec. 313(d)(1), added subsec. (f).
1964 - Subsec. (a)(14). Pub. L. 88-272, Sec. 204(b), added par.
(14).
Subsec. (a)(15). Pub. L. 88-272, Sec. 213(c), added par. (15).
1962 - Subsec. (a)(12)(B), (C). Pub. L. 87-792 substituted ''is a
plan described in section 403(a)'' for ''meets the requirements of
section 401(a)(3), (4), (5), and (6)'', in subpar. (B), and added
subpar. (C).
1961 - Subsec. (a)(6)(C). Pub. L. 87-256 added subpar. (C).
Subsec. (a)(13). Pub. L. 87-293 added par. (13).
1955 - Subsec. (a). Act Aug. 9, 1955, excluded from definition of
wages, remuneration paid for services performed in a possession of
the United States by a United States citizen if the employer is
required by the law of the possession to withhold income tax on the
remuneration.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to distributions after
Dec. 31, 2001, see section 641(f)(1) of Pub. L. 107-16, set out as
a note under section 402 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1996 AMENDMENTS
Amendment by Pub. L. 104-191 applicable to taxable years
beginning after Dec. 31, 1996, see section 301(j) of Pub. L.
104-191, set out as a note under section 62 of this title.
Amendment by section 1421(b)(8)(D) of Pub. L. 104-188 applicable
to taxable years beginning after Dec. 31, 1996, see section 1421(e)
of Pub. L. 104-188, set out as a note under section 72 of this
title.
Amendment by Pub. L. 104-117 applicable to remuneration paid
after Mar. 20, 1996, see section 1(e) of Pub. L. 104-117, set out
in a Treatment of Certain Individuals Performing Services in
Certain Hazardous Duty Areas; Effective Date note under section 112
of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11703(f)(2) of Pub. L. 101-508 provided that: ''The
amendment made by paragraph (1) (amending this section) shall apply
as if included in the amendments made by section 1151 of the Tax
Reform Act of 1986 (Pub. L. 99-514, see Effective Date of 1986
Amendment note set out under section 79 of this title) but shall
not apply to any amount paid before the date of the enactment of
this Act (Nov. 5, 1990) which the employer treated as wages for
purposes of chapter 24 of the Internal Revenue Code of 1986 when
paid.''
EFFECTIVE DATE OF 1989 AMENDMENTS
Section 7631(c) of Pub. L. 101-239 provided that: ''The
amendments made by this section (amending this section) shall apply
to remuneration paid after December 31, 1989.''
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1001(g)(4)(B)(iii), 1011(f)(9), and
1011B(a)(33) of Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
Amendment by section 1011B(a)(22)(D) of Pub. L. 100-647 not
applicable to any individual who separated from service with the
employer before Jan. 1, 1989, see section 1011B(a)(22)(F) of Pub.
L. 100-647, set out as a note under section 3121 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 122(e)(4) of Pub. L. 99-514 applicable to
prizes and awards granted after Dec. 31, 1986, see section 151(c)
of Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 1272(c) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, with certain
exceptions and qualifications, see section 1277 of Pub. L. 99-514,
set out as a note under section 931 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 491(d)(38) of Pub. L. 98-369 applicable to
obligations issued after Dec. 31, 1983, see section 491(f)(1) of
Pub. L. 98-369, set out as a note under section 62 of this title.
Amendment by section 531(d)(4) of Pub. L. 98-369 effective Jan.
1, 1985, see section 531(h) of Pub. L. 98-369, set out as an
Effective Date note under section 132 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 112(b)(5) of Pub. L. 97-34 applicable with
respect to taxable years beginning after Dec. 31, 1981, see section
115 of Pub. L. 97-34, set out as a note under section 911 of this
title.
Amendment by section 124(e)(2)(A) of Pub. L. 97-34 applicable to
remuneration paid after Dec. 31, 1981, see section 124(f)(2) of
Pub. L. 97-34, set out as a note under section 21 of this title.
Amendment by section 311(h)(6) of Pub. L. 97-34 applicable to
taxable years beginning after Dec. 31, 1981, see section 311(i)(1)
of Pub. L. 97-34, set out as a note under section 219 of this
title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENTS
Amendment by Pub. L. 95-615 applicable to remuneration paid after
Nov. 8, 1978, but with taxpayers allowed to elect not to have the
amendment apply with respect to any taxable year beginning after
Dec. 31, 1977, and before Jan. 1, 1979, see section 209(b), (c) of
Pub. L. 95-615, set out as a note under section 911 of this title.
Amendment by Pub. L. 95-600 applicable with respect to taxable
years beginning after Dec. 31, 1978, see section 164(d) of Pub. L.
95-600, set out as a note under section 127 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1501(b)(7) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1501(d) of
Pub. L. 94-455, set out as a note under section 62 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by Pub. L. 93-406 effective on Jan. 1, 1975, see
section 2002(i)(2) of Pub. L. 93-406, set out as an Effective Date
note under section 4973 of this title.
EFFECTIVE DATE OF 1972 AMENDMENT
Section 3(b) of Pub. L. 92-279 provided that: ''The amendments
made by section 2 (amending this section) shall apply to wages paid
on or after the first day of the first calendar month which begins
more than 30 days after the date of the enactment of this Act (Apr.
26, 1972).''
EFFECTIVE DATE OF 1966 AMENDMENT
Amendment by Pub. L. 89-809 applicable with respect to
remuneration paid after Dec. 31, 1966, see section 103(n)(4) of
Pub. L. 89-809, set out as a note under section 871 of this title.
EFFECTIVE DATE OF 1965 AMENDMENT
Amendment by section 313(d)(1), (2) of Pub. L. 89-97 applicable
only with respect to tips received by employees after 1965, see
section 313(f) of Pub. L. 89-97, set out as a note under section
6053 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by section 204(b) of Pub. L. 88-272 applicable to
remuneration paid after Dec. 31, 1963, in the form of group-term
life insurance provided after such date, see section 204(d) of Pub.
L. 88-272, set out as an Effective Date note under section 79 of
this title.
Amendment by section 213(c) of Pub. L. 88-272 applicable to
remuneration paid after the seventh day following Feb. 26, 1964,
see section 213(d) of Pub. L. 88-272, set out as a note under
section 62 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
EFFECTIVE DATE OF 1961 AMENDMENTS
Amendment by Pub. L. 87-293 applicable with respect to
remuneration paid after Sept. 22, 1961, see section 201(d) of Pub.
L. 87-293, set out as a note under section 912 of this title.
Section 110(h)(4) of Pub. L. 87-256 provided that: ''The
amendments made by subsection (g) of this section (amending this
section and section 3402 of this title) shall apply with respect to
wages paid after December 31, 1961.''
SHORT TITLE OF 1966 AMENDMENT
Pub. L. 89-368, Sec. 1, Mar. 15, 1966, 80 Stat. 38, provided
that: ''This Act (enacting sections 276 and 6682 of this title and
section 428 of Title 42, The Public Health and Welfare, amending
sections 1402, 1403, 3402, 4061, 4251, 4253, 6015, 6154, 6211,
6412, 6654, 7205, and 7701 of this title and section 1202 of Title
19, Customs Duties, and enacting provisions set out as notes under
sections 276, 3402, 4061, 4251, 6154, and 6654 of this title and
section 428 of Title 42) may be cited as the 'Tax Adjustment Act of
1966'.''
REPEALS; AMENDMENTS AND APPLICATION OF AMENDMENTS UNAFFECTED
Section 201(c) of Pub. L. 87-293, cited as a credit to this
section, was repealed by Pub. L. 89-572, Sec. 5(a), Sept. 13, 1966,
80 Stat. 765. Such repeal not deemed to affect amendments to this
section contained in such provisions, and continuation in full
force and effect until modified by appropriate authority of all
determinations, authorization, regulations, orders, contracts,
agreements, and other actions issued, undertaken, or entered into
under authority of the repealed provisions, see section 5(b) of
Pub. L. 89-572, set out as a note under former section 2515 of
Title 22, Foreign Relations and Intercourse.
CONTROVERSIES INVOLVING WHETHER INDIVIDUALS ARE EMPLOYEES FOR
PURPOSES OF EMPLOYMENT TAXES
Section 530 of Pub. L. 95-600, as amended by Pub. L. 96-167, Sec.
9(d), Dec. 29, 1979, 93 Stat. 1278; Pub. L. 96-541, Sec. 1, Dec.
17, 1980, 94 Stat. 3204; Pub. L. 97-248, title II, Sec. 269(c)(1),
(2), 96 Stat. 552; Pub. L. 99-514, Sec. 2, title XVII, Sec.
1706(a), Oct. 22, 1986, 100 Stat. 2095, 2781; Pub. L. 104-188,
title I, Sec. 1122(a), Aug. 20, 1996, 110 Stat. 1766, provided
that:
''(a) Termination of Certain Employment Tax Liability. -
''(1) In general. - If -
''(A) for purposes of employment taxes, the taxpayer did not
treat an individual as an employee for any period, and
''(B) in the case of periods after December 31, 1978, all
Federal tax returns (including information returns) required to
be filed by the taxpayer with respect to such individual for
such period are filed on a basis consistent with the taxpayer's
treatment of such individual as not being an employee,
then, for purposes of applying such taxes for such period with
respect to the taxpayer, the individual shall be deemed not to be
an employee unless the taxpayer had no reasonable basis for not
treating such individual as an employee.
''(2) Statutory standards providing one method of satisfying
the requirements of paragraph (1). - For purposes of paragraph
(1), a taxpayer shall in any case be treated as having a
reasonable basis for not treating an individual as an employee
for a period if the taxpayer's treatment of such individual for
such period was in reasonable reliance on any of the following:
''(A) judicial precedent, published rulings, technical advice
with respect to the taxpayer, or a letter ruling to the
taxpayer;
''(B) a past Internal Revenue Service audit of the taxpayer
in which there was no assessment attributable to the treatment
(for employment tax purposes) of the individuals holding
positions substantially similar to the position held by this
individual; or
''(C) long-standing recognized practice of a significant
segment of the industry in which such individual was engaged.
''(3) Consistency required in the case of prior tax treatment.
- Paragraph (1) shall not apply with respect to the treatment of
any individual for employment tax purposes for any period ending
after December 31, 1978, if the taxpayer (or a predecessor) has
treated any individual holding a substantially similar position
as an employee for purposes of the employment taxes for any
period beginning after December 31, 1977.
''(4) Refund or credit of overpayment. - If refund or credit of
any overpayment of an employment tax resulting from the
application of paragraph (1) is not barred on the date of the
enactment of this Act (Nov. 6, 1978) by any law or rule of law,
the period for filing a claim for refund or credit of such
overpayment (to the extent attributable to the application of
paragraph (1)) shall not expire before the date 1 year after the
date of the enactment of this Act.
''(b) Prohibition Against Regulations and Rulings on Employment
Status. - No regulation or Revenue Ruling shall be published on or
after the date of the enactment of this Act (Nov. 6, 1978) and
before the effective date of any law hereafter enacted clarifying
the employment status of individuals for purposes of the employment
taxes by the Department of the Treasury (including the Internal
Revenue Service) with respect to the employment status of any
individual for purposes of the employment taxes.
''(c) Definitions. - For purposes of this section -
''(1) Employment tax. - The term 'employment tax' means any tax
imposed by subtitle C of the Internal Revenue Code of 1986
(formerly I.R.C. 1954, section 3101 et seq. of this title).
''(2) Employment status. - The term 'employment status' means
the status of an individual, under the usual common law rules
applicable in determining the employer-employee relationship, as
an employee or as an independent contractor (or other individual
who is not an employee).
''(d) Exception. - This section shall not apply in the case of an
individual who, pursuant to an arrangement between the taxpayer and
another person, provides services for such other person as an
engineer, designer, drafter, computer programmer, systems analyst,
or other similarly skilled worker engaged in a similar line of
work.
''(e) Special Rules for Application of Section. -
''(1) Notice of availability of section. - An officer or
employee of the Internal Revenue Service shall, before or at the
commencement of any audit inquiry relating to the employment
status of one or more individuals who perform services for the
taxpayer, provide the taxpayer with a written notice of the
provisions of this section.
''(2) Rules relating to statutory standards. - For purposes of
subsection (a)(2) -
''(A) a taxpayer may not rely on an audit commenced after
December 31, 1996, for purposes of subparagraph (B) thereof
unless such audit included an examination for employment tax
purposes of whether the individual involved (or any individual
holding a position substantially similar to the position held
by the individual involved) should be treated as an employee of
the taxpayer,
''(B) in no event shall the significant segment requirement
of subparagraph (C) thereof be construed to require a
reasonable showing of the practice of more than 25 percent of
the industry (determined by not taking into account the
taxpayer), and
''(C) in applying the long-standing recognized practice
requirement of subparagraph (C) thereof -
''(i) such requirement shall not be construed as requiring
the practice to have continued for more than 10 years, and
''(ii) a practice shall not fail to be treated as
long-standing merely because such practice began after 1978.
''(3) Availability of safe harbors. - Nothing in this section
shall be construed to provide that subsection (a) only applies
where the individual involved is otherwise an employee of the
taxpayer.
''(4) Burden of proof. -
''(A) In general. - If -
''(i) a taxpayer establishes a prima facie case that it was
reasonable not to treat an individual as an employee for
purposes of this section, and
''(ii) the taxpayer has fully cooperated with reasonable
requests from the Secretary of the Treasury or his delegate,
then the burden of proof with respect to such treatment shall be
on the Secretary.
''(B) Exception for other reasonable basis. - In the case of
any issue involving whether the taxpayer had a reasonable basis
not to treat an individual as an employee for purposes of this
section, subparagraph (A) shall only apply for purposes of
determining whether the taxpayer meets the requirements of
subparagraph (A), (B), or (C) of subsection (a)(2).
''(5) Preservation of prior period safe harbor. - If -
''(A) an individual would (but for the treatment referred to
in subparagraph (B)) be deemed not to be an employee of the
taxpayer under subsection (a) for any prior period, and
''(B) such individual is treated by the taxpayer as an
employee for employment tax purposes for any subsequent period,
then, for purposes of applying such taxes for such prior period
with respect to the taxpayer, the individual shall be deemed not
to be an employee.
''(6) Substantially similar position. - For purposes of this
section, the determination as to whether an individual holds a
position substantially similar to a position held by another
individual shall include consideration of the relationship
between the taxpayer and such individuals.''
(Section 1122(b) of Pub. L. 104-188 provided that:
(''(1) In general. - The amendment made by this section (amending
section 530 of Pub. L. 95-600, set out above) shall apply to
periods after December 31, 1996.
(''(2) Notice by internal revenue service. - Section 530(e)(1) of
the Revenue Act of 1978 (Pub. L. 95-600) (as added by subsection
(a)) shall apply to audits which commence after December 31, 1996.
(''(3) Burden of proof. -
(''(A) In general. - Section 530(e)(4) of the Revenue Act of
1978 (as added by subsection (a)) shall apply to disputes
involving periods after December 31, 1996.
(''(B) No inference. - Nothing in the amendments made by this
section shall be construed to infer the proper treatment of the
burden of proof with respect to disputes involving periods before
January 1, 1997.'')
(Section 1706(b) of Pub. L. 99-514 provided that: ''The amendment
made by this section (amending section 530 of Pub. L. 95-600, set
out above) shall apply to remuneration paid and services rendered
after December 31, 1986.'')
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D (Sec. 1401-1465) of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 41, 275, 3402, 3507,
3509, 4999, 6014, 6051, 6053, 6103, 6331 of this title; title 42
section 653a.
