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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.
  • 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. 
 

IRS Circular 230 Notice
Internal Revenue Service regulations state that only a formal opinion that meets specific requirements can be used to avoid tax penalties. Any tax advice in this communication is not intended or written to be used, and cannot be used by a taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer, because it does not meet the requirements of a formal opinion. 

© Copyright 2020 Armstrong Teasdale LLP. All rights reserved National Law Review, Volume I, Number 271
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About this Author

John Igoe, Tax, Employee Benefits, Trusts, Estates, Attorney, Armstrong Teasdale
Partner

As a member of the Tax, Employee Benefits and Trusts and Estates practice group since 1986, Jon Igoe guides individuals in the creation and administration of trusts and estates and in connection with closely-held businesses. He also handles guardianships, conservatorships and employee benefits issues involving health care plans.

314-342-8019
Jill Palmquist, Estate Planning Attorney, Armstrong Teasdale Law Firm
Of Counsel

Jill Palmquist specializes in estate planning and works closely with her clients to protect their families and wealth during transitional times such as illness, disability and death utilizing instruments such as powers of attorney, wills, revocable trusts, irrevocable trusts (including irrevocable life insurance trusts, irrevocable grantor trusts and charitable trusts) and limited partnerships. She has experience in dealing with special assets such as closely held stock, 401(k) plans, traditional and ROTH IRAs, Section 529 Plans; and in working with situations requiring extra consideration...

314-621-5070
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