The IRS recently announced a Voluntary Compliance Program for employers who have improperly classified workers as “independent contractors” rather than “employees.” It is an opportunity for some companies to save a significant amount of money in potential taxes, penalties and interest.
Under the terms of the Voluntary Compliance Program, the employer will pay a penalty of just more than 1 percent of the wages paid to the workers over the most recent tax year, and the employer agrees to treat the workers as employees for future tax periods. In exchange, the employer will not be liable for employment taxes, penalties or interest from previous years.
The program is open to all businesses, non-profits and government entities that are not currently under an IRS audit. Organizations must meet certain minimum requirements and apply to the IRS for acceptance into the program.
In recent years, the IRS and Department of Labor have increased efforts to find and penalize companies that misclassify workers. The IRS has estimated that misclassification costs the government more than $1 billion per year in unpaid taxes.
If you believe your company might benefit from the voluntary compliance program, Barnes Dennig can help. Our tax professionals can advise you on the impact of participating and file the necessary forms with the IRS.
For more information, click here to read the IRS’s official announcement or contact your Barnes Dennig representative at (513) 241-8313.