IRS PROVIDES RELIEF FOR EMPLOYERS WITH PAST DUE PAYROLL TAXES

TAX BRIEF

October 2011
Internal Revenue Service (IRS) issued Announcement 2011-64 on September 21, 2011 which provides relief to employers from any potential past due federal employment taxes. According to this announcement, the IRS is initiating The Voluntary Classification Settlement Program (VCSP) which allows employers to reclassify their workers as employees and significantly limit their federal employment tax exposures from misclassifying their workers as nonemployees. The determination of whether a worker is an employee or an independent contractor is based on facts and circumstances. In general, the worker is an employee if the employer has the right to direct and control the worker under the common law. Unfortunately, in many situations this may not be as clear, and many workers are in fact misclassified as independent contractors. Prior to participating in the VCSP, an employer must meet the following requirements: 1. The workers are consistently treated as nonemployees 2. All the required Forms 1099 are filed 3. The employer is not currently under IRS audit 4. The employer is not currently under audit by other government agencies on worker classification The benefits of participating in the VCSP for an employer are significant. They are: 1. The past due employment tax liability is reduced to 10 percent 2. There will be no interest and penalty charges on the liability 3. Audit protection is granted against an employment tax audit for prior years In order to participate in the VCSP, an employer must first submit an application to the IRS. The IRS will then contact the employer to continue the process. The employer and the IRS will eventually come to an agreement on the amount due, and the employer will be subject to 6 year statute of limitations for three years right after the agreement. As your tax and business advisors, we want to make sure you are aware of the planning opportunities currently available. Please feel free to contact any of our tax professionals with any questions you have regarding this or any other tax issues.
Thank you for your time and continued support of the Enterprise Zone program As always, please call if you would like to discuss any of these items further. Your Tax Partners, Mark G. Cook, Partner Steven J. Cupingood, Partner Todd Northrup, Partner Javier Ramirez, Partner

Richard A. Linder, Partner David Neighbors, Partner Don G. Leve, Partner Thomas E. Wendler, Partner

Jon Widdowson, Partner Michael Wu, Partner Dan B. Faulk, Partner

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed herein. Notice: Opinions, conclusions, and other information in this message are not intended to represent recommendations or advice to you or any other person. Each persons circumstances are unique, and we strongly suggest you discuss your specific situation with your professional advisor before taking any action based on the information herein or information to which this message refers.