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IRS Offers Voluntary Employee Reclassification Program - Emil Estafanous, CPA : Emil Estafanous, CPA

IRS Offers Voluntary Employee Reclassification Program

Employers might reclassify eccentric contractors as employees and extent a ensuing sovereign payroll taxes for their many new taxation year, and equivocate associated penalties and seductiveness for before years, underneath an IRS module announced Sep 21.

In Announcement 2011-64, a IRS summarized a new Voluntary Classification Settlement Program (VCSP). Unlike an existent allotment module for employers underneath an IRS examination, a VCSP allows authorised taxpayers to willingly enter into an agreement with a IRS.

Generally, if an employer has a right to approach and control how a workman performs services for a employer, that workman is scrupulously personal as an workman and a employer contingency secrete FICA and income taxes from salary and other remuneration and compensate a employer’s share of FICA tax. Proper sequence of workers has been a long-lived regard for employers, employees and a government. Last year, a IRS launched a inhabitant investigate plan in that it sent thousands of review letters to employers. On Sep 16, a IRS sealed a chit of bargain with a U.S. Department of Labor to share information between them to revoke misclassification.

To attend in a VCSP, employers contingency contention an focus and determine to prospectively provide their workers or a category or organisation of workers as employees for sovereign practice taxation functions in destiny taxation periods. Employers contingency also determine to extend a duration of reduction on comment of practice taxes for 3 years for any of a 3 calendar years commencement after a date of a agreement.

In return, employers will compensate 10% of a practice taxation guilt differently due for a many new taxation year, that will not be theme to seductiveness or penalties. In addition, a IRS will not control an practice taxation review with honour to a employer’s workman sequence for before years. The practice taxation guilt for a many new year is dynamic underneath a reduced rates of Sec. 3509, that provides that for disaster to concede and secrete taxes outset from a workman misclassification, a employer’s guilt for a employee’s apportionment of FICA taxation is singular to 20% of a normal workman FICA tax. This commission is doubled for negligence or bullheaded slight of stating requirements.

To be authorised for a program, employers contingency not now be underneath review by a IRS, a Labor Department or a state group concerning workman classification. Employers whose workman sequence has been formerly audited contingency have complied with formula of a audit. Also, employers contingency have consistently treated workers as nonemployees, for whom they contingency have filed all compulsory Forms 1099 for a prior 3 years.

Employers can request for a module regulating Form 8952, Application for Voluntary Classification Settlement Program, during slightest 60 days before they wish to start treating a workers as employees.

About Emil Estafanous, CPA
Certified Public Accountant (CPA) Tax Professional committed in representing taxpayers and resolving their tax problems.

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