Client Alerts IRS Voluntary Settlement Program

Publication
10.21.11

If you have clients that have significant exposure in the area of worker classification, or in other words, independent contractors that are really employees, consider the following information. As with any voluntary disclosure program, taxpayers should carefully deliberate the risks and rewards involved.

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IRS Voluntary Settlement Program – Worker Classification
If you have clients that have significant exposure in the area of worker classification, or in other words, independent contractors that are really employees, consider the following information. As with any voluntary disclosure program, taxpayers should carefully deliberate the risks and rewards involved.

The Internal Revenue Service has launched a new program that will enable many employers to resolve past worker classification issues at a relatively low cost by voluntarily reclassifying their workers. This worker classification issue relates to misclassifying employees as independent contractors.

Employers accepted into the voluntary program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest and penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years.

To be eligible for the program, 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, and
  • Not currently be under audit by the IRS, Department of Labor or a state agency concerning the classification of these workers.

Employers will want to carefully consider whether or not to participate in the program. More information can be found on the IRS website, IRS Voluntary Worker Classification Settlement Program. If you have any questions, please contact your ORBA representative or Rob Swenson at 312.670.7444.

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