The IRS is making an effort to help employers comply with worker classification and settle payroll tax issues from past years at a reduced cost.

 

The Voluntary Classification Settlement Program ("VCSP") was launched today (Wednesday). Under the program, many businesses, nonprofits and government entities will be able to properly treat their workers – currently classified as nonemployees or independent contractors - as employees.

Employers who voluntarily reclassify their workers can make a minimal payment to cover past payroll taxes rather than wait for an IRS audit.

 

Details are available in Announcement 2011-64 and on the Employment Tax pages of the IRS Web Site.

 

In discussions with agents and at seminars, my understanding is the IRS has made worker classification a point of emphasis, and the status of contractors and nonemployees is expected to be scrutinized.

 

To be eligible for the program, applicants must:

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

 

I think the program is a great idea. Other tax relief and “amnesty” programs at federal and state levels have let taxpayers comply and pay significantly less than the amount of back taxes due. Let’s hope employers who have not classified workers as employees take full advantage of this program. If for no other reason, likely tax hikes starting in 2013 will leave less money to catch up on back taxes.