CPM Worker Classification & ABC Test 3

Question 1

Section 530 of the Revenue Act of 1978 provides employers relief from employment tax liabilities if they can demonstrate all of the following EXCEPT:

Accepted Answer

Signed independent contractor agreements with each worker

Answer

Section 530 relief requires reasonable basis, consistency, and timely information reporting, but does not require signed independent contractor agreements.

Question 2

A payroll manager discovers that a worker classified as an independent contractor was actually performing work under direct supervision. Which form should the worker file to request IRS determination of their status?

Accepted Answer

Form SS-8

Answer

Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding) is filed to request an IRS ruling on worker classification.

Question 3

Under the common law control test, which factor is given the GREATEST weight in determining worker classification?

Accepted Answer

Behavioral control over how the work is performed

Answer

Behavioral control—specifically the right to direct and control how the worker performs the job—is the primary factor under the common law control test.

Question 4

A company treats 50 software developers as independent contractors but classifies 5 similar developers as employees. Under Section 530, this inconsistency would:

Accepted Answer

Disqualify the company from Section 530 relief

Answer

Section 530 requires consistent treatment of all workers in substantially similar positions; inconsistent treatment disqualifies the employer from safe harbor protection.

Question 5

Which of the following is a 'reasonable basis' under Section 530 for treating workers as independent contractors?

Accepted Answer

A prior IRS audit that examined the classification and made no change

Answer

A prior IRS audit in which the same classification was examined and left unchanged constitutes a recognized reasonable basis for Section 530 purposes.

(CPM) Certified Payroll Manager Practice Test

(CPM) Certified Payroll Manager Practice Test

CPM Worker Classification & ABC Test 3