On September 21, 2011 the IRS announced what it has named the “New Voluntary Worker Classification Settlement Program.”
If an employer has had worker classification issues, i.e. the IRS deems workers to employees while the employer considers workers independent contractors, the IRS considers the employer liable for the workers payroll taxes.
If an employer has not being paying payroll taxes on behalf of employees, then the employer owes the taxes and penalties and interest. As part of a “Fresh Start” initiative, the IRS is waiving past interest and penalty payments on these workers and promising not to audit the employer’s payroll taxes related to these workers for prior years in exchange for a payment equaling approximately 1% of wages paid to the workers.
Of course, an employer must meet certain condition to be eligible, including consistently having treated the workers as nonemployees, having filed all 1099 Forms for the workers during the past three years, and cannot currently be under audit by the IRS, Department of Labor, or the Georgia Department of Revenue, among others.
Full details are available on the IRS’s website at Announcement 2011-64.
Smith, Gilliam, Williams & Miles has experience in these matters; please contact us if we can help.