Issue Number:    IR-2012-56

Many businesses can now resolve past worker classification issues at a low cost by voluntarily reclassifying their workers. Better yet, they don’t have to wait for an IRS audit to do so.

By prospectively reclassifying workers, making a minimal payment and meeting a few other requirements, eligible businesses can achieve greater certainty for themselves, their workers and the government. Already, 540 employers have been approved to participate in the new IRS Voluntary Classification Settlement Program (VCSP) since it was launched last September.

The VCSP is available to many businesses, tax-exempt organizations and government entities that currently treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees in the future. To be eligible, an employer 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 or the Department of Labor or a state agency concerning the classification of these workers

Interested employers can apply for the program by filing Form 8952. Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. It’s that simple. Moreover, employers will not be audited on payroll taxes related to these workers for prior years.

Details on these and other tax benefits are on IRS.gov. In addition, the Small Business Tax Center (www.irs.gov/smallbiz) has links to a variety of useful tax tools for small business, including the Virtual Small Business Tax Workshop, a downloadable tax calendar, common forms and their instructions and help on everything from how to get an Employer Identification Number (EIN) online to how to engage with the IRS in the event of an audit.

For more information: www.onts9.com