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Have 1099s? Workers’ Compensation Amnesty for Employers

By October 24, 2011 February 19th, 2015 No Comments

Tired businessman

Concerned that your non-employees may actually be considered employees?  Now may be the time to re-classify them.

Last week the IRS announced a voluntary initiative to resolve compliance issues and create a fresh start for businesses who may have tax obligations outstanding.  By reclassifying workers as employees and making a minimal payment covering past payroll tax obligations, employees can become compliant without waiting for an IRS audit.

The new program, called VCSP or Voluntary Classification Settlement Program is an attempt to bring more businesses into tax compliance. If a business has erroneously treated workers as non-employees or independent contractors, the VCSP will enable the company to reclassify the workers as employees and obtain substantial relief on federal payroll taxes that potentially may have been owed under the previous programs.

There are some conditions of eligibility:

  • Workers must have been treated as nonemployees
  • Form 1099s must have been filed for the last three years
  • Firm must not be involved in an audit already regarding classification of the workers.

To apply for the program file Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before the workers are identified as employees.

The incentive to voluntarily reclassify: employers will pay just over one percent of the wages paid to reclassified workers if accepted into the program, plus no interest, penalties or charges  will be due. The amnesty also provides that employers will not be audited on payroll taxes related to these workers for prior years.

There is a special six-year statute of limitations for participating employers verus the usual three years.

Full details, including FAQs, are available on the Employment Tax pages of IRS.gov, and in Announcement 2011-64,

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For more information contact www.hrknowledge.com or info@hrknowledge.com.