IRS Guidance Favorably Modifies Voluntary Worker Classification Settlement Program

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.

On December 17, 2012, the Internal Revenue Service (IRS) issued Announcements 2012-45 and 2012-46 to revise the tax relief for employers that utilize the Voluntary Classification Settlement Program (VCSP).  Originally established in December 2011, the VCSP permits eligible taxpayers to voluntarily reclassify their workers for federal employment tax purposes and obtain limited tax relief for previous nonemployee