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IRS Independent Contractor Amnesty Program

  • October 18, 2014
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IRS AFresh Start@ Program Allows Employers to Voluntarily Reclassify Workers From Independent Contractors to Employees While Avoiding the Normal Penalties and Interest.

The Internal Revenue Service (IRS) announced a new amnesty program yesterday that will allow employers to voluntarily reclassify their workers from independent contractors to employees without incurring the hefty charges associated with a reclassification by the IRS.   By participating in the IRS Voluntary Classification Settlement Program (VCSP), employers may avoid the additional taxes, penalties and interest that they would otherwise incur if the IRS reclassifies their workers without their consent.

Because the IRS has been very aggressive in its efforts to reclassify workers they believe are improperly classified as independent contractors in recent years,  participation in this program is worth considering if the current classification of your employees as contractors is subject to challenge by the IRS.   As many businesses have learned the hard way, reclassification of your workers by the IRS is a painful and expensive process.

Under the new program,  dubbed “Fresh Start” by the IRS,   the IRS has stated that they will forgive the normal penalties associated with reclassification, as follows:

AEmployers accepted into the program will pay an amount effectively equaling 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. Participating employers will, for the first three years under the program, be subject to a special six?year statute of limitations, rather than the usual three years that generally applies to payroll taxes. A

Further details may be found at: http://www.irs.gov/businesses/small/article/0,,id=246013,00.html

Attorney Denise Olrich at The Law Office of Denise Olrich can help you determine whether you have correctly classified your workers as independent contractors rather than employees, so that you can find out whether this Voluntary Classification Settlement Program can help you avoid the much higher costs that come with involuntary reclassification of your workers by the IRS.  You can contact her at (707) 775-3900 or email her at Aolrich@olrichlaw.com@.

 

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