Publication
Legal Alert: IRS Announces the ‘Voluntary Classification Settlement Program’ to Reduce Federal Employment Tax on Worker Misclassification
Worker Classification
by Geoffrey L. Gunnerson, Carlene Y. Lowry, Mark A. Ziemba
and Tiffanny Brosnan
Misclassifying workers as independent contractors rather than employees can carry significant tax consequences. These tax consequences impact not only the employer entity but can also result in personal tax liability to the persons with an ability to direct the employer’s finances. For this reason, many employers who may have misclassified workers are hesitant to come forward, even if their workers may be more accurately classified as “employees.”
On September 21, 2011, the Internal Revenue Service (IRS) announced the Voluntary Classification Settlement Program (VCSP), in which the IRS permits employers to prospectively reclassify workers as employees with limited federal employment tax liability and without an IRS audit or administrative correction procedure. No change would need to be made to the treatment of the workers on a retroactive basis for federal employment tax purposes.
About Snell & Wilmer
Founded in 1938, Snell & Wilmer is a full-service business law firm with more than 500 attorneys practicing in 16 locations throughout the United States and in Mexico, including Los Angeles, Orange County and San Diego, California; Phoenix and Tucson, Arizona; Denver, Colorado; Washington, D.C.; Boise, Idaho; Las Vegas and Reno, Nevada; Albuquerque, New Mexico; Portland, Oregon; Dallas, Texas; Salt Lake City, Utah; Seattle, Washington; and Los Cabos, Mexico. The firm represents clients ranging from large, publicly traded corporations to small businesses, individuals and entrepreneurs. For more information, visit swlaw.com.
