Employee Misclassification "Fresh Start" Progam Announced by IRS
On September 21, 2011 the IRS announced a new voluntary worker classification settlement
program called Voluntary Classification Settlement Program (VCSP). VCSP is part of a larger "Fresh Start" initiative to help taxpayers and business address their tax responsibilities.
This new program will provide relief to employers who misclassified their workers as independent contractors by allowing employers the opportunity to get into compliance rather than waiting for an IRS audit. Under this program, eligible employers can obtain substantial relief from past federal payroll taxes they may have owed in the past, if they misclassified employees.
To be eligible the business must:
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Consistently have treated the workers in the past as nonemployees,
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Have filed all required Forms 1099 for the workers for the previous three years
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Not currently be under audit by the IRS
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Not currently be under audit by the Department of Labor or a state agency concerning the classification of these workers
Interested employers need to apply for the Voluntary Classification Settlement Program at least 60 days before they want to begin treating the workers as employees. Employers accepted into the program will pay just over one percent of the wages paid to reclassified worker for the past year. No interest or penalties will be due and the employer will not be audited on payroll taxes related to these workers for prior years.
Many employers that misclassify employees do not even realize the workers are misclassified. Payroll tax penalties and interest can be very expensive for a business. For a FREE consultation and help determining if your workers are misclassified call today or click here.
