Free Independent Contractor Agreement, Internal Revenue Independent Contractor Classification Settlement

Filed in Tax, Savings by on July 15, 2012

If you are not using my free Independent Contractor Agreement, you should know about the Internal Revenue worker voluntary classification settlement program.

Of course, it would be far better to begin using the Independent Contractor Agreement retroactively, as many have. However, this program lets employers resolve past worker classification issues by “voluntarily reclassifying” workers and making a minimal payment covering past payroll tax obligations, rather than waiting for an Internal Revenue audits. It is part of the Internal Revenue “Fresh Start” initiative.

Under the program, eligible employers can get relief from past federal payroll taxes if they prospectively treat workers as employees. It is to those that erroneously treated workers as non-employees or independent contractors and now want to correctly treat workers as employees.

To be eligible, an employer must:

  • Have consistently treated workers as non-employees,
  • Have filed required 1099 Forms for the prior three years,
  • Not be under audit by the IRS, the Department of Labor or a state concerning worker classification.
  • Apply on Form 8952, Voluntary Classification Settlement Program, at least 60 days before they want to treat the workers as employees.

Employers accepted pay an amount just over 1% of the wages paid to reclassified workers for the past year, with no interest or penalties. Employers will not be audited on payroll taxes related to this for prior years. Click here for more on this Internal Revenue program.

 

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