On February 27, 2013, the Internal Revenue Service (IRS) issued News Release IR-2013-23 to provide additional favorable guidance regarding modifications to the Voluntary Classification Settlement Program (VCSP) issued in Announcements 2012-45 and 2012-46 addressing worker classification issues. The VCSP allows eligible employers to voluntarily reclassify their workers for federal employment tax purposes and obtain considerable “forgiveness” for previous non-employee treatment. The IRS describes the program as a “low-cost option” for achieving certainty under the law by reclassifying workers as employees for future tax periods.
One year ago the Internal Revenue Service (IRS) published Announcement 2011-64, which provided a Voluntary Classification Settlement Program (VCSP) for employers to treat their workers as common law employees rather than independent contractors only on a prospective basis. Now the IRS has issued two new announcements that favorably modify and expand the VCSP. Because certain favorable tax relief is available only for applications filed before June 30, 2013, employers should review quickly their worker classification issues in light of this new guidance.
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