The program lets employers be compliant in making the minimum payments on past payroll taxes instead of waiting to be audited by the IRS.
This program is part of the IRS’s “Fresh Start” program, which helps taxpayers and businesses take care of their taxes.
IRS Commissioner, Doug Shulman said, “This program gives assurance and relief to employers in an important area. This is part of a bigger effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”
The Voluntary Classification Settlement Program, or VCSP, has been implemented to get employers to be in compliance with their tax obligations and reduce tax burdens for employers, employees and the government. Eligible employers can get help with their payroll taxes that they owe if they treat workers as employees. The VCSP is accessible for many businesses, tax-exempt companies and government agencies that treat their employees as non-employees or independent contractors. It has been implemented so employers can address and correct this issue.
To be eligible, an applicant must:
-Have regularly treated their workers as non-employees,
-Have filed all required 1099 Forms for their workers for the last three years
-Not be in the process of an audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers
Employers may apply for this program by filing an 8952 Form, Application for Voluntary Classification Settlement Program, for 60 days before they begin treating their workers as employees.
Employers who are accepted will pay a fee that equals a little over 1% of the wages that are paid to their reclassified employees for the last year. There will be no interest or penalties, nor will the employer be audited on their payroll taxes for these employees. For the first three years, employers will be subject to a six year statute of limitations instead of the normal three years on payroll taxes.
For full details and answers to any questions can be found on the Employment Tax Pages and Announcement 2011-64 at www.irs.gov.