On Sept. 21, 2011, IRS announced a new voluntary compliance program that would allow Employers to “correctly” classify its work force as Employees rather than Independent Contractors. This new start is an IRS attempt to raise money from errant businesses without the crippling effect  of  the full imposition of taxes, penalties and interest when a worker classification issue arises on audit and the Employer loses the battle.

 

This voluntary compliance program is designed to reward Employers who reclassify workers and treat them as employees going forward by giving them relief from taxes they may have owed in the past by treating workers as independent contractors.

 

To be eligible for this new program an Employer/business must:

1.    Cannot be under current IRS audit;
2.    Cannot be under audit by any state or federal agency regarding worker classification issues;
3.    Must be current and have filed 1099’s for all workers for the past three(3) years before applying to the voluntary program  

The benefits of offering yourself up to the IRS and participating in the program are remarkably generous and include the following:

1.    Pay 10% of  employment tax liability owed for misclassification of workers for most recent tax year;
2.    No worker classification audits for past tax years;
3.    No interest and penalties imposed
4.    IRC Section 3509 reduced rates will apply to withholding(1.5%), FICA(7.65%)

As a condition of this program, an Employer will agree to extend the three(3) year statute on assessment of Employment taxes on the first three(3) years after an Employer enters the Program. To participate in the program an Employer must file specific IRS forms , meet certain calendaring requirements and treat all workers of the same class as employees. You cannot pick and chose between treatment of same class of employees.

If I can assist you or any of your clients in this reclassification process, please feel free to contact my office at 954-981-6533.