Voluntary Worker Classification Settlement Program
The Internal Revenue Service has a program that enables many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers. This program allows employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit. To be eligible, an applicant must:
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Consistently have treated the workers in the past as nonemployees,
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Have filed all required Forms 1099 for the workers for the previous three years, and
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Not currently be under an employment tax audit by the IRS, or a worker classification audit by the Department of Labor or a state agency.
Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.
Employers accepted into the program will pay an amount effectively equalling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. For additional information see the instructions for Form 8952 and the frequently asked questions portion of the IRS web site: