If you’ve misclassified your workers as independent contractors that should have been classified as employees, the IRS now has a Voluntary Classification Settlement Program (VCSP). This is part of its "Fresh Start" initiative and allows business owners to come forward and settle their misclassification issues.
The advantages of using VSCP include:
- The business can reclassify workers as employees for future periods and pay only 10% of the employment tax liability for the most recent year
- There are no penalties and interest on the employment tax liability
- The IRS will not audit the worker classification issue for prior years.
Form 8952 is used to apply for this program. It needs to be filed 60 days before the intent to treat the workers as employees.
The Department of Labor (DOL) and the IRS are not in collaboration on this issue so this could lead to fines and penalties by the DOL and state agencies. For more information on this program and to see if you are eligible, click here.
For more information on Skoda Minotti's Tax Planning & Preparation Services, contact Marie Lenarduzzi by leaving a comment below, or by calling 440-449-6800.