Eligible employers are now able to take advantage of the Voluntary Worker Classification Settlement Program (VCSP), which reclassifies workers as employees. The settlement includes a “discounted” payment to the U.S. Treasury. To be eligible, an employer must file all required Form 1099s for the reclassified workers for the prior three years, consistently treat the workers other than employees and not be under audit by the IRS, Department of Labor or a state related to worker classification.
The applicable Form 8592 is due 60 days before the workers are first classified as employees. The IRS will separately review all Forms 8952. If the application is accepted, the employer then completes the full application process as instructed by the IRS. If the Form 8592 is rejected, the employer can reapply as soon as eligibility is documented.
Employers approved for the settlement program will enter into a closing agreement with the IRS which requires the employer to treat workers as employees in all future tax periods. The closing agreement increases the usual three year statute of limitation period to a special six year statute period. Full payment of the discounted employment taxes on the reclassified workers is required with signing of the closing agreement.
The discounted employment tax due under VCSP generally will be equal to 10% of the employment tax liability due on the reclassified workers compensation from the most recent tax year. Interest or penalty will not be added. Future employment tax audits are avoided on workers reclassified under VCSP.
For more information, please go to www.irs.gov.