IRS Floats Classification Deal
The U.S. Internal Revenue Service, Washington, D.C., launched the Voluntary Classification Settlement Program that will allow employers to resolve past worker classification issues by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.
The program is intended for businesses and other entities that currently erroneously treat their workers as nonemployees or independent contractors and now want to correctly treat these workers as employees. Employers accepted into the program will pay an amount effectively equaling just more than 1 percent of the wages paid to the reclassified workers for the past year.
To be eligible, an applicant must:
- Consistently have treated the workers in the past as nonemployees
- Have filed all required Forms 1099 for the workers for the previous three years
- Not currently be under audit by the IRS
- Not currently be under audit by the U.S. Department of Labor, Washington, or a state agency concerning the classification of these workers
Details are available on the Employment Tax pages of IRS.gov and in Announcement 2011-64.