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August 2013

Voluntary Classification Settlement Program

The Voluntary Classification Settlement Program (VCSP) is a voluntary program to resolve issues of worker classification between employee and independent contractor. This can be an issue with businesses that "hired" an individual for a specific job, but then kept finding more things for the individual to do. The real benefit of this program is that if the "hire" is found to be an employee, an eligible business only has to pay 10 percent of the unpaid employment tax liability, there is no interest or penalties, and the issue is taken off the table for audits.


The rules under the new ACA hinge significantly on how many full-time employees a business has. Some businesses might be tempted to evade compliance with the ACA by aggressively classifying workers as independent contractors or part-time employees. As a result, the IRS can be expected to ramp up enforcement in this area as part of its responsibility in implementing the ACA. And since the IRS has been offering something very close to amnesty off and on since 2011 via the VCSP, tolerance for violators could be very low.


Announcement 2012-45


TIGTA Report: Employers Do Not Always Follow IRS Worker Determination Rulings