WASHINGTON — The Internal Revenue Service has launched a program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.
The Voluntary Classification Settlement Program (VCSP) is available to many businesses that erroneously treat their workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.
It will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.
Employers accepted into the program will pay an amount effectively equaling just over 1% 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.