VanAntwerp Attorneys, LLP
Phone: 606-618-0698

Employee or independent contractor: New program allows easy IRS changes

Employers can get into hot water with a number of agencies when they willfully classify workers as independent contractors, when, in fact, under IRS rules the worker is very much an employee. Things to look for are whether or not the worker actually has control over their employment decisions.

For example, if the worker has little choice in where they work (at home or in the office), is performing job duties that are usually and customarily performed by employees, and is expected to attend meetings that are mandated for employees, that worker may be a de facto employee. Classify your worker in the wrong category and you could face stiff fines, penalties and back taxes.

New Program rules and qualifications

For employers who have started to worry that perhaps they have been misclassifying their workers, a new program by the Internal Revenue Service (IRS) may offer just the right kind of help to get back on solid footing with the IRS. The program is called the Voluntary Classification Settlement Program (VCSP) and, if the employer qualifies, any penalties, fines, and most taxes, will be waived in lieu of moving forward with proper classification.

To qualify, an employer must:

  • Have consistently treated their workers as non-employees
  • Filed required 1099 forms for the non-employees
  • Not currently be under audit for employment classification by the IRS, The Department of Labor, or a state agency

If an employer qualifies for the program, it can expect that it:

  • Would not be liable for any interest or penalties on back wages for non-employees
  • Not be subject to employment tax worker classification audits for previous years
  • Would pay 10 percent of the tax liability that would have been due from non-worker compensation paid in the most recent tax year

Seek legal counsel

Employers who believe they may qualify for the program are encouraged to seek legal counsel regarding the greater liabilities and benefits of the program, and to do so as soon possible. The program is not a panacea for past misclassification, and the sooner an employer remedies any issues, the easier it is for an employer to move onto business as usual.

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