Rev. Proc. 80-35

Section 1. Purpose

The purpose of this revenue procedure is to amend Sec. 2 and Sec. 3.03 of Rev. Proc. 78-35, 1978-2 C.B. 536, which provides instructions for implementing the provisions of section 530 of the Revenue Act of 1978, Pub. L. 95-600, 1978-3 C.B. (Vol. 1) 1, 119, relating to the employment tax status of independent contractors and employees.

Sec. 2. Background

Rev. Proc. 78-35 is modified to reflect changes made to section 530 of the Act by Pub. L. 96-167, 1980-1 C.B. 483, 486, pertaining to the extension of certain dates in section 530 of the Act.

Sec. 3. Implementation

.01 Sec. 2 of Rev. Proc. 78-35 is modified to read as follows:

"Section 530(a)(1) of the Act, as amended, provides that if, for purposes of the employment taxes under subtitle C of the Internal Revenue Code, a taxpayer did not treat an individual as an employee for any period ending before January 1, 1981, then the individual will be deemed not to be an employee for that period, unless the taxpayer had no reasonable basis for not treating the individual as an employee. For any period during 1979 or 1980, the relief applies only if (1) all federal tax returns (including information returns) required to be filed by the taxpayer with respect to the individual for the period are filed on a basis consistent with the taxpayer's treatment of the individual as not being an employee, and (2) the treatment is consistent with the treatment for periods beginning after December 31, 1977."

.02 Sec. 3.03 of Rev. Proc. 78-35 is modified to read as follows:

".03 Consistency in 1979 and 1980

The relief under section 530(a)(1) of the Act, as amended, does not apply to the employment tax treatment of any individual for any period during 1979 or 1980, if the taxpayer (or a predecessor) treated any individual holding a substantially similar position as an employee for employment tax purposes for any period beginning after December 31, 1977. This provision prevents taxpayers from changing the way they treat workers solely to take advantage of the relief provisions. The application of this provision to predecessors is intended to prevent evasion of this rule, for example, by reincorporations. H.R. Rep. No. 95-1748, indicates that it is expected that legislation is to be developed to clarify the employment tax status of individuals."

Sec. 4. Effect on Other Documents

Rev. Proc. 78-35 is modified.