Nonprofit Blog

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Friday, October 21, 2011

Are your exempt organization’s payroll practices in compliance? (Part 2)

Posted by Armanino Nonprofit Team

IRS Announces Voluntary Worker Classification Settlement Program

Last month (in Announcement 2011-64) the IRS launched its new Voluntary Classification Settlement Program (VCSP) explaining the program “will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.” This program is available to many businesses (including tax-exempt organizations) that have erroneously treated workers as nonemployees or independent contractors.

Under this program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed in the past if they prospectively treat workers as employees. To be eligible, an employer must:
· Consistently have treated the workers in the past as nonemployees,
· Have filed all required Forms 1099 for the workers for the previous three years,
· Not currently be under audit by the IRS, and
· Not currently be under audit by the Department of Labor or a state agency concerning the classification of these workers

Employers accepted under this program will pay in an amount just over 1% of the wages paid to the reclassified workers for the past year (no interest or penalties will be assessed). Interested employers can apply for the program by filing Form 8952. Form instructions can be found here.

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