CCA 201041043: Section 530 relief may apply based on industry practice

Plain-English summary

The Chief Counsel’s advice states that a taxpayer may be entitled to relief under section 530 based on reasonable reliance on a long-standing practice recognized by a significant segment of the transportation industry. The advice also states that an error on Form 1099 may not violate the reporting requirement, but that the taxpayer should correct the error.

Ruling snapshot

• Question: Could section 530 relief apply when the taxpayer relied on a long-standing industry practice of treating certain workers as independent contractors?
• Outcome: Advice given
• Key authorities: IRC § 530; IRC § 3121; IRC § 6110(k)(3)

Full text (IRS public release)

ID: CCA_2010093008475470 Number: 201041043
Release Date: 10/15/2010
Office: -----------------------------
UILC: 3121.10-04

From: ----------------------
Sent: Thursday, September 30, 2010 8:47:57 AM
To: ---------------
Cc: ----------------------
Subject: Section 530 question

As we discussed by telephone yesterday, it appears that taxpayer may be entitled to relief under section 530, based on reasonable reliance on long-standing recognized practice of a significant segment of the industry, as evidenced by the affidavit taxpayer provided from one of the founding owners of taxpayer (described in the taxpayer's letter regarding 530 relief). The founder states that, based on his lifelong experience in the transportation industry, taxpayer from its inception used an IC model, contracting with ICs to provide the primary piece of equipment (the truck) and all maintenance. The founder worked for many years as an IC owner-operator for multiple motor carriers, observing nearly exclusive use of ICs in the industry.

As for the reporting consistency requirement, while the error on Form 1099 may not make taxpayer fail reporting requirement, taxpayer should correct the error.

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