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The IRS is taking a more proactive approach with its new Voluntary Classification Settlement Program. The VCSP is part of the larger "Fresh Start" Initiative from the IRS aimed at giving businesses and individuals a fresh start with their tax obligations.
If you think you may have misclassified employees as independent contractors, the VCSP offers some significant advantages. According to news sources, companies can reclassify individuals as employees for future tax periods and only pay 10 percent of the employment tax liability as a result of the reclassification for the most recent tax year. There are no penalties or interest on the employment tax liability. The IRS also agrees not to audit the employer on the classification of these workers for prior years.
In exchange for this deal, employers agree to extend the limitations period for assessment of employment taxes for an additional three years for the first three years after reclassification. This means that rather than the standard 3-year look-back window, the IRS now has a six year window to go back and review your tax returns to see if additional tax monies are owed.
In order to take advantage of the VCSP, employers have to apply to the program by completing Form 8952. Visit the IRS website for more information. Go to: http://www.irs.gov/formspubs/article/0,,id=242970,00.html |
