§3509 — Determination of employer’s liability for certain employment taxes
7 cases·3 followed·1 distinguished·3 cited—43% support
Statute Text — 26 U.S.C. §3509
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—
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.
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.
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—
by substituting “3 percent” for “1.5 percent” in paragraph (1); and
by substituting “40 percent” for “20 percent” in paragraph (2).
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.
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.
For purposes of this section—
If the amount of any liability for tax is determined under this section—
the employee’s liability for tax shall not be affected by the assessment or collection of the tax so determined,
the employer shall not be entitled to recover from the employee any tax so determined, and
section 3402(d) and section 6521 shall not apply.
This section shall not apply to any employer with respect to any wages if—
the employer deducted and withheld any amount of the tax imposed by chapter 24 on such wages, but
failed to deduct and withhold the amount of the tax imposed by subchapter A of chapter 21 with respect to such wages.
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).
7 Citing Cases
- 20 - [*20] Petitioner is also mistaken that it is entitled to the lower withholding tax rate under section 3509. Section 3509 does not apply if the liability is due to the employer’s intentional disregard of the requirement to deduct and withhold such tax.
Neither Section 3402 nor Section 3509 Reduces D&R's Liability for Employment Taxes.
x in their entirety, with no credit for withholdings. Section 3509(d)(1) specifically provides that the employee’s liability for income - 6 - tax shall not be affected by the assessment or collection of any tax determined against the employer under section 3509. To quote Lucas v. Commissioner, T.C. Memo. 2000-14: “In other words, the employee remains fully liable for income tax arising from the receipt of gross wages. * * * Therefore, even though N&M misclassified petitioner as an independent co
See Internal Revenue Code section 3509 for details.
2885, as amended, and he has not sought relief under section 3509, relating to the wages paid during any of the four quarters of each of the years in issue.
e that petitioners are not entitled to exclude from gross income any part of the State Farm payment pursuant to section 104(a)(2).7 To reflect the foregoing, Decision will be entered under Rule 155. 6 Petitioners argue, inter alia, that, pursuant to sec. 3509, respondent should look to State Farm for the tax liability on the State Farm payment. Petitioner, however, has never been an employee or trainee of State Farm. Accordingly, as to petitioner, State Farm has no duty to withhold taxes pursuan