The IRS’ expanded Voluntary Classification Settlement Program (VCSP) paves the way for more taxpayers to reclassify their workers as employees for future tax periods.
The IRS modified several eligibility requirements, making it possible for more employers, especially larger ones, to apply for this program.
The VCSP provides partial relief from federal payroll taxes for eligible employers who are treating their workers or a class or group of workers as independent contractors or other nonemployees and now want to treat them as employees. Businesses, tax-exempt organizations and government entities may qualify.
Under the revamped program, employers under IRS audit, other than an employment tax audit, can qualify for the VCSP. Employers accepted into the program will no longer be subject to a special six-year statute of limitations, rather than the usual three years that normally applies to payroll taxes. These and other permanent modifications to the program are described in Announcement 2012-45 and in questions and answers, posted on IRS.gov.
Normally, employers are barred from the VCSP if they failed to file required Forms 1099 with respect to workers they are seeking to reclassify for the past three years. However, the IRS is waiving this eligibility requirement until June 30. Details on this temporary change are in Announcement 2012-46.
For more details, visit IRS.gov.