Friday, November 4, 2011

New IRS Worker Reclassification Program


At the end of September, the IRS announced a new voluntary disclosure for companies with misclassified workers. Workers are frequently misclassified for a variety of reasons, either intentionally to save costs, or simply because there was a lack of knowledge. 
The IRS’ Voluntary Classification Settlement Program (VCSP) provides an opportunity for employers to reclassify their workers as employees for future tax periods with partial relief from federal employment taxes.  The VCSP is available to employers who are currently classifying their workers as independent contractors or other nonemployees and want to correct the classification voluntarily.
To be eligible for the program, the employer must have consistently treated the workers as nonemployees, and must have filed all required 1099 forms on the workers that need to be reclassified.  Additionally, the company cannot be involved in any current audit by the IRS, Department of Labor, or by a state government agency. If the IRS or the Department of Labor has previously audited the business concerning the classification of the workers, they will be eligible only if the employer has complied with the results of that audit. Exempt organizations and Government entities may participate in VCSP if they meet all of the eligibility requirements.
If you are questioning whether or not your employees are classified correctly, please contact us and we will be happy to assist you.

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