According to today’s IRS release—IR-2013-23—eligibility requirements under the expanded program will make it possible for more employers, especially larger employers, to apply for the program.
VCSP is an option for employers to achieve certainty by reclassifying their workers as employees for future tax periods.
The IRS reported that approximately 1,000 employers have applied for the VCSP and that it provides partial relief from federal payroll taxes for employers that treat their workers (or a class or group of workers) as independent contractors or other nonemployees and now treat them as employees. Businesses, tax-exempt organizations, and government entities may qualify.
Revised, expanded program
Under the revised program—
- Employers under IRS audit (other than an employment tax audit) can qualify for the VCSP.
- Employers accepted into the program will no longer be subject to a special six-year statute of limitations, rather than the usual three years that normally applies to payroll taxes.
Employers generally are barred from the VCSP if they failed to file required Forms 1099 with respect to the workers they are seeking to reclassify for the past three years. With the revised program, the IRS is waiving this eligibility requirement until June 30, 2013.
To be eligible for the VCSP, an employer must:
- Currently be treating the workers as nonemployees,
- Consistently have treated the workers in the past as nonemployees, including having filed any required Forms 1099 (or, for applications filed by June 30, 2013, comply with the expanded eligibility program with respect to 1099 filings),
- Not currently be under audit on payroll tax issues by the IRS, and
- Not currently be under audit by the Department of Labor or a state agency concerning the classification of these workers or contesting the classification of the workers in court
Read more about the VCSP on the IRS website.
Interested employers can apply for the program by filing the latest version (Rev. December 2012) of 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 generally pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year (and no interest or penalties will be due).
Read a list of frequently asked questions concerning the program and the tax and penalty relief available under VCSP.