Employee Miss-Classification Amnesty

 

For many years, many employers have miss-classified employees as independent contractors, which is in violation of Federal and State law.  The IRS has an amnesty program called Voluntary Classification Settlement Program (VCSP).  It is important to note that many states do not have a similar program and will levy heavy penalties for miss-classification of employees.

Employers are now allowed to voluntarily reclassify workers as employees and receive relief from payroll taxes otherwise owed and will not notify the state.  Traditionally there is an exchange of information program between the IRS and many states, but in this case the IRS has promised to omit VCSP from information sharing. To qualify the employer must (1) consistently treated the workers as nonemployees, (2) filed all required Form 1099s for the workers in the previous three years, and (3) is not currently under audit by the IRS or the Department of Labor. The IRS is providing temporary relief through 6/30/13 to allow taxpayers, who have not filed all required Form 1099s for the previous three years and modified eligibility requirements to allow taxpayers under IRS audit, other than an employment tax audit, to participate in the VCSP program.

Because there might be unintentional employment legal issues one should consult with a labor attorney first.

Please contact our office if you need more information