The IRS Voluntary Classification Settlement Program (VCSP) is a program allowing organizations who have been treating certain workers as independent contractors to voluntarily reclassify their workers as employees for future tax periods for employment tax purposes. However there are several issues your organization should think about prior to applying for the program.

First off, under the VCSP, an organization will pay 10 percent of the amount of employment taxes that would have been due on compensation paid to the workers being reclassified for the most recent tax year, calculated under the reduced rates of section 3509(a) of the Internal Revenue Code. In addition, the organization accepted into the program will not be liable for any interest and penalties on the payment under the VCSP, and will not be audited for employment tax purposes for prior years with respect to the worker classification of the workers.

Though this may seem like a good idea there are a number of things your organization should think about before applying with the IRS to join the VCSP. For instance did you know that once your organization chooses to reclassify some of its workers as employees, all workers in the same class as those workers must be treated as employees for employment tax purposes? Or that you must apply to the program (using Form 8952, Application for Voluntary Classification Settlement Program) at least 60 days from the date your organization wants to begin treating its workers as employees. What's more, to be eligible under the VCSP, you must have filed all required Forms 1099 for the previous 3 years for the workers you want to reclassify.

If you need assistance with issues surrounding workers you think you might have misclassified and how to move forward in terms of your own internal policies and procedures or staff training then subscribe today and start asking questions. Or, feel free to contact us regarding setting up a customized training program; so that we can help your organization achieve compliance with IRS and State Level regulations and initiatives regarding worker classification issues.