IRS To Provide Past Payroll Tax Relief to Employers Who Reclassify Workers

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IRS Logo1 150x150 IRS To Provide Past Payroll Tax Relief to Employers Who Reclassify WorkersThe IRS has announced a new Voluntary Worker Classification Settlement Program that will reward employers who voluntarily reclassify workers by imposing a minimal past payroll tax obligation.

As part of the IRS’ “Fresh Start” initiative, the Voluntary Classification Settlement Program (VCSP) allows employers to get into compliance by making a minimal payment covering past payroll tax obligations – generally 10 percent of that which could be assessed if the employer waited for an IRS audit, according to a post.

The IRS said that the VCSP is available to any business, government entity or tax-exempt organization “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.”

Employers must apply for the program and the eligibility requirements include:

  • Consistent treatment of workers in the past as non-employees,
  • Have filed all required Forms 1099 for the workers for the previous three years
  • Not currently under audit by the IRS
  • Not currently under audit by the Department of Labor or a state agency concerning the classification of these workers

If eligible, employers must file Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.

In addition to a reduced past payroll tax payment, the IRS said that no interest or penalties will be assessed, and that employers will not be audited on payroll taxes related to the affected workers for prior years.

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