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IRS Announces Program To Help Employers Resolve Worker Misclassification

The Internal Revenue Service has announced a new program to help employers resolve misclassification of employees.  The program is voluntary and is designed to be simple and involve a low cost to the employer.

To be eligible, an employer:

  • Must have consistently treated workers as non-employees;
  • Must have filed required Forms 1099 for the misclassified workers for the past three years; and
  • Must not be currently under audit by any federal or state agency concerning classification of the workers in question.

To participate in the program, the employer files Internal Revenue Service Form 8952. The employer should file the form at least 60 days before changing its classification of the workers in question.

If an employer's application is accepted, it must pay an amount approximating just over one percent of the wages paid to the reclassified workers during the past year. The employer will not owe interest or penalties and the Internal Revenue Service will not audit the employer's payroll tax returns related to the workers in question for earlier years. However, the employer will, for the first three years of participating in the program, be subject to a six-year statute of limitations on payroll taxes, rather than the usual three-year statute of limitations.

© Copyright 2020 Armstrong Teasdale LLP. All rights reserved National Law Review, Volume I, Number 289


About this Author

The Tax, Employee Benefits, and Trust & Estates practice group handles a wide variety of federal, state, and local tax matters.

The practice group’s work in the tax and employee benefits area includes planning tax strategies for businesses and individuals, applying for rulings and determination letters from the Internal Revenue Service, and representing clients in disputes with the Internal Revenue Service. The group’s representation of business clients includes advice on choice of entity, including C corporation, S corporation, partnership, limited partnership, limited...