
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC3509]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                      Subtitle C--Employment Taxes
 
       CHAPTER 25--GENERAL PROVISIONS RELATING TO EMPLOYMENT TAXES
 
Sec. 3509. Determination of employer's liability for certain 
        employment taxes
        

(a) In general

    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--

                        (1) Withholding taxes

        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.

                  (2) Employee social security tax

        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.

(b) Employer's liability increased where employer disregards reporting 
        requirements

                           (1) In general

        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--
            (A) by substituting ``3 percent'' for ``1.5 percent'' in 
        paragraph (1); and
            (B) by substituting ``40 percent'' for ``20 percent'' in 
        paragraph (2).

                     (2) Applicable requirements

        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.

(c) Section not to apply in cases of intentional disregard

    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.

(d) Special rules

    For purposes of this section--

                   (1) Determination of liability

        If the amount of any liability for tax is determined under this 
    section--
            (A) the employee's liability for tax shall not be affected 
        by the assessment or collection of the tax so determined,
            (B) the employer shall not be entitled to recover from the 
        employee any tax so determined, and
            (C) sections \1\ 3402(d) and section 6521 shall not apply.
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    \1\ So in original. Probably should be ``section''.
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    (2) Section not to apply where employer deducts wage but not 
                            social security taxes

        This section shall not apply to any employer with respect to any 
    wages if--
            (A) the employer deducted and withheld any amount of the tax 
        imposed by chapter 24 on such wages, but
            (B) failed to deduct and withhold the amount of the tax 
        imposed by subchapter A of chapter 21 with respect to such 
        wages.

       (3) Section not to apply to certain statutory employees

        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).

(Added Pub. L. 97-248, title II, Sec. 270(a), Sept. 3, 1982, 96 Stat. 
553; amended Pub. L. 100-647, title II, Sec. 2003(d), Nov. 10, 1988, 102 
Stat. 3598; Pub. L. 101-508, title V, Sec. 5130(a)(4), Nov. 5, 1990, 104 
Stat. 1388-289.)


                               Amendments

    1990--Subsec. (d)(3). Pub. L. 101-508 substituted ``subsection 
(d)(3)'' for ``subsection (d)(4)''.
    1988--Subsec. (d)(3). Pub. L. 100-647 substituted ``subsection 
(d)(4)'' for ``subsection (d)(3)''.


                    Effective Date of 1990 Amendment

    Amendment by Pub. L. 101-508 effective as if included in the 
enactment of Pub. L. 100-647, Sec. 2003(d), see section 5130(b) of Pub. 
L. 101-508, set out as a note under section 1402 of this title.


                             Effective Date

    Section 270(c) of Pub. L. 97-248 provided that: ``The amendment made 
by this section [enacting this section] shall take effect on the date of 
the enactment of this Act [Sept. 3, 1982], except that such amendments 
shall not apply to any assessment made before January 1, 1983.''
