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NOW IS THE TIME
TO VOLUNTARILY ASSESS YOUR COMPANY'S
EMPLOYEE CLASSIFICATION PROCEDURES
Two recent initiatives render the time ripe for your Company to assess whether it is properly classifying its workers and employees to avoid potential liability in the future.
IRS and DOL Join Forces to End Practice of Employee Misclassification
The Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL) have recently entered into a series of agreements entitled "Memorandum of Understanding" (MOU) - expressly targeting employee misclassification. The MOU will have the effect of allowing the agencies to share information, facilitating the law enforcement process. Many States, including New York and Connecticut, have signed onto the MOU process, extending the cooperative effort to state administrative agencies as well. IRS Invites Voluntary Reclassification with Limited Liability On a more positive note, in an effort to encourage employers to voluntarily reassess their employee classification procedures, the IRS recently instituted the Voluntary Classification Settlement Program (VCSP). This program is designed to induce employers to voluntarily reclassify workers previously treated as independent contractors or other nonemployees - a historically tricky classification analysis that, if incorrect, could prove costly for the employer. Now, eligible employers who prospectively treat these workers as employees may do so and: - Incur very limited liability, paying only a small tax of 10% of the employment tax liability for the most recent tax year alone.
- Receive agreement from the IRS that they will not be held liable for potential penalties and interests on the amount that would otherwise be due in an IRS initiated investigation.
- Will not be the subject of an employment tax audit with regard to those workers.
The program requires an employer to file an application with the IRS at least 60 days prior to the date on which the employer would like to begin treating its workers as employees. Nukk-Freeman & Cerra can help you determine whether this program is appropriate for your business, conduct the assessment and prepare the necessary filings to help you avoid future penalties. To discuss the VCSP as it relates to your company, please contact Holly English or the Nukk-Freeman & Cerra attorney with whom you normally work. | 
