COMPTROLLER'S SEAL STATE OF CONNECTICUT
STATE OF CONNECTICUT
WILLIAM E. CURRY JR.
COMPTROLLER
OFFICE OF THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775
EDWARD J. FORAND JR.
DEPUTY COMPTROLLER

MEMORANDUM NO. 94-9a

December 2, 1994

TO THE HEADS OF ALL STATE AGENCIES

Attention: Chief Administrative and Fiscal Officers, Business Managers, and Payroll and Personnel Officers
Subject: Patient Income Reportability

On January 26 and 27, 1994 the Office of the State Comptroller and the Internal Revenue Service (IRS) co-sponsored a seminar on determining the difference between an employee andan independent contractor. The seminar was held to aid State agencies in making the proper determination when classifying individuals as outlined by the IRS.

In a continuing effort to identify specific areas that require clarification we are presenting this memorandum with regard to patient workers.

Patient Workers
Within the State there are several agencies that operate not-for-profit rehabilitation centers which provide assistance to mentally retarded and developmentally disable individuals. A center may operate a variety of programs, including a sheltered workshop, day treatment center, or community residences for the workers, the purpose of which is to provide the individuals with the opportunity to live as useful and productive lives as possible. The purpose of the sheltered workshop in particular is to provide the workers with the opportunity to perform services in a work-life setting for therapeutic and rehabilitative purposes.

Most of the workers are referred to the sheltered workshop from the agency. Other workers may be referred from the local community or the residential treatment program. Others may participate in the sheltered workshop on a voluntary basis. Due to the nature of the workers' behaviors or disabilities, they are not able to compete in regular industry.

The workers do not depend upon the renumeration they receive for support. The workers do not receive any benefits.

An employer-employee relationship does not exist if the following prerequisites are evident:

To summarize, if the primary intent of the services being performed by the workers in the sheltered workshop is therapeutic or rehabilitative and the workers' services are not performed as a means of earning a living and the services they perform do not displace regular employees, the workers are not employees. The wages they earn are not reportable.

Workers in the above-qualified category are not employees of the agency and/or the State and are not subject to the taxes imposed under the Federal Insurance Contributions Act (FICA) or to Federal or State Income Tax Withholding.

In addition, the individuals are not self-employed and are not subject to the taxes imposed under the Self-Employment Contributions Act.

Assistance in Determining a Worker's Status
If any agency has a specific worker that does not meet the above criteria, the IRS can assist the State to determine whether a worker is an employee by completing "Form SS-8 Determination of Employee Work Stated for Purposes of Federal Employment Taxes and Income Tax Withholding". However, prior to submitting the form to the IRS, it must be submitted to the Accounting Systems Division of the Comptroller's Office. Our Office will forward it to the IRS after a preliminary review.

In addition, the Accounting Systems Division is available to review and discuss the status of a worker. Please contact Brenda Halpin, Accounting Manager, at 702-3440.

General Information
This memorandum is the second in a series of memoranda my Office will be issuing regarding the employer-employee relationship. Each calendar year we will identify other areas that require clarification. If you have any specific areas that you would like to have addressed, please contact the Accounting Systems Division in my Office.

Questions
Questions may be directed to the Accounting Systems Division regarding the interpretation of this memorandum or determining a worker's status.

Accounting Systems Division 702-3440

WILLIAM E. CURRY JR.
STATE COMPTROLLER

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