In-Depth Articles New IRS Program to Address Employee Classification Issues The Internal Revenue Service announced on September 21, 2011, that it has launched a new program designed to allow employers to resolve past worker classification issues and qualify for substantial relief from overdue federal payroll taxes by voluntarily reclassifying their workers. The IRS outlines the details of the new program in a recent article on their website: This new program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit. This is part of a larger "Fresh Start" initiative at the IRS to help taxpayers and businesses address their tax responsibilities. "This settlement program provides certainty and relief to employers in an important area," said IRS Commissioner Doug Shulman. "This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations." The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.   To be eligible, an applicant must: Consistently have treated the workers in the past as nonemployees Have filed all required Forms 1099 for the workers for the previous three years Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers Interested employers can apply for the program by filing Form 8952, Application for 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 an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes. Additional information can be found in Announcement 2011-64 on the IRS website at http://www.irs.gov/pub/irs-drop/a-11-64.pdf. If you have any questions about worker classification or have been contact by the IRS regarding worker classification please feel free to contact us at 239-939-2233.  We'd be glad to speak with you. Back to In-Depth Articles Back to Resources   To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used for the purpose of avoiding penalties assessed under the Internal Revenue Code.