IRS Voluntary Classification Settlement Program: the Jury Is Still Out…

“The [Voluntary Worker Classification Settlement Program] does not, however, relieve employers of liability under state tax laws, workers’ compensation laws, federal or state wage and hour laws (overtime, minimum wage, meal breaks, termination payouts, etc.), ERISA, or other employment laws.”

The benefits (and risks) of participating in the Internal Revenue Service’s new Voluntary Classification Settlement Program, which allows employers to avoid penalties and fines in exchange for reclassifying workers incorrectly treated as independent contractors, continue to capture the interest of lawyers and law firms on JD Supra. For your reference, here’s an updated roundup of commentary and analysis on the IRS program:

Employers Beware: United States Department of Labor and Internal Revenue Service Team up to Combat Misclassification of Workers as Independent Contractors (Cole Schotz):

“Employers that utilize ‘independent contractors’ in any manner are well advised to assess their relationships and determine whether the classification can withstand what will surely be heightened scrutiny from various enforcement agencies.” Read more»

Employee Misclassification Relief? (Ford & Harrison LLP):

“There are many factors to consider before participating in the VCSP. Employers who become aware that their employees are misclassified may be better off coming into compliance and taking a wait and see approach. However, the program will be a viable option for some employers.” Read more»

IRS Announces New Voluntary Worker Classification Program (Reed Smith):

“Reclassifying workers as employees, however, raises many issues other than employment tax issues, including, for example: retirement benefit plan issues; health and welfare benefit plan issues; and state tax classification, unemployment tax, and workers’ compensation issues. Employers should consider all potential ramifications before participating in the VCSP.” Read more»

IRS Announces New Voluntary Worker Classification Settlement Program (Duane Morris LLP):

“Under long-standing IRS guidance, the determination of whether a worker is performing services as an employee or as an independent contractor depends on the facts and circumstances, and is generally based on the common-law test of whether the service recipient has the right to direct and control the workers on how to perform the services.” Read more»

IRS Establishes a Voluntary Classification Settlement Program (Bryan Cave):

“In exchange for agreeing to prospectively treat the class of workers as employees for future tax periods, the employer will pay only 10% of the employment tax liability that would otherwise have been due on the compensation paid to the workers for the most recent tax year, but determined under the reduced rates of Section 3509 of the Internal Revenue Code. Additionally, the employer will not be liable for any interest and penalties and will not be subject to an employment tax audit with respect to  the classification of such workers for prior years.” Read more»

IRS Tempts Employers Who Have Been Misclassifying Employees (Charles “Chuck” Rubin)

“Given the relatively small amount that is due, the program provides an excellent opportunity for taxpayers to put themselves into compliance… Application for the program is made on Form 8952, Application for Voluntary Classification Settlement Program.” Read more»


See also: Is IRS Giving Employers a Free Pass with The Voluntary Worker Classification Settlement Program? Yes and No…


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