CCA 200928039: Section 530 analysis may apply to a parent treated as the wage-control employer

Plain-English summary

Chief Counsel addressed an employment-tax examination involving a parent and related subordinate entities. The preliminary view was that the subordinate entities were likely the common-law employers and retained control over wage payments, so their examinations would need section 530 analysis. Counsel agreed that the parent should remain open to guard against inconsistent results and to test that preliminary view. Counsel also advised that section 530 could still matter for the parent if it was treated as the employer controlling payment of wages under section 3401(d)(1).

Ruling snapshot

• Question: Can section 530 relief be relevant to a parent that may be the section 3401(d)(1) employer for workers treated as independent contractors?
• Outcome: Advice given that section 530 must also be considered for the parent
• Key authorities: IRC § 3401(d)(1); section 530 of the Revenue Act of 1978

Full text (IRS public release)

ID: CCA_2009052207544641 Number: 200928039

Release Date: 7/10/2009

Office: -----------------------------

UILC: 3121.10-00

From: ---------------

Sent: Friday, May 22, 2009 7:54:49 AM

To: ------------------

Cc: ----------------------------------

Subject: FW: 3401(d)(1) and 530

So you think the subs are likely the c/l er and that they probably retain control over payment of wages, in which case, the examination of the subs will need to include 530 analysis for subs. But you want to keep parent open to protect against whipsaw (and of course to make sure your tentative thinking proves accurate) and you question whether an analysis of 530 could still be relevant for the parent if the only possibility is a finding that the parent controls the payment of wages (ie, is a (d)(1)) to the workers who had been treated as independent contractors but are EEs of the subs? Answer is yes, we need to talk about how 530 could apply to the parent if the parent is a (d)(1) employer.