Employers that have misclassified workers as independent contractors can benefit under a new IRS initiative announced on September 21st. The program, known as the Voluntary Classification Settlement Program or VCSP, provides an employer with the opportunity to correct worker classification problems with only limited liability for past employment taxes.
Under the program, a qualified employer can reclassify independent contractors for future tax periods; the program has the following benefits:
- participating employers will only pay ten percent of the employment tax liability that may have been due on compensation paid to the workers for the most recent tax year, which will be determined under the reduced rates of section 3509 of the Internal Revenue Code;
- participating employers will not be liable for any interest and penalties on the liability; and
- participating employers will not be subject to an employment tax audit with respect to the worker classification of the workers for prior years.