Ka-Ching!

Has your business classified workers as independent contractors who should really be classified as employees? This sensitive issue is a big concern for small business owners. More and more entrepreneurs are relying on independent contractors to handle their workloads, but the definition of “independent contractor” can be hazy. The Department of Labor is taking new aim at this problem for 2012, according to Compensation Café, and is joining with the IRS to share information, help reduce misclassification of employees and improve employer compliance.

The Labor Department will be focusing on enforcing laws and auditing employers, but the IRS is being a bit more forgiving. The agency’s Voluntary Classification Settlement Program, part of its “Fresh Start” initiative, allows business owners to come forward voluntarily and settle their misclassification issues instead of trembling in fear of an audit.

VCSP has several advantages: •Businesses can reclassify workers as employees for future tax periods and pay just 10 percent of the employment tax liability that results from this reclassification for the most recent tax year. •There are no penalties or interest on the employment tax liability. •The IRS will not audit your business on these workers’ classifications for prior years.

However, it’s not all peaches and cream. In order to get these terms, you must agree that the standard three-year “look-back” window for the IRS to review your employment taxes (and see if you owe more money) is extended to six years.

To apply for VCSP, complete Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before you want to begin treating the workers as employees. Your business must also meet these eligibility criteria: •Workers to be reclassified must have been consistently treated as non-employees; •Employer must have filed the appropriate 1099 forms for the prior three years; •Employer cannot currently be undergoing a classification audit by the IRS, Department of Labor or any state agency; •If the employer was previously audited by the IRS, DOL or any state agency, it must have complied with the results.

Being accepted into the VCSP program is not automatic; however, even if the IRS rejects your application, the agency has said that this rejection doesn’t automatically trigger an audit of your business. You are also allowed to reapply for the program in the future.

Compensation Café notes, however, that although the IRS and the DOL are collaborating on this issue, the DOL isn’t offering amnesty. That means participating in the VCSP program could lead to your business being assessed back taxes, penalties and fines by the DOL and/or state agencies. So before plunging into VCSP headfirst, talk to your accountant to determine how this could affect your payroll, benefits programs, unemployment and workers compensation insurance, and the possible additional penalties you might face

Twill; I'd of thought the same.....

Randy; Isn't that crazy?...But, hey, here in Colorado, that's the way 99% of residential roofing contractors operate, (framers too!)...Then there's the larger/established roofing contractor that basically runs two businesses concurrently....Flat/commercial is done legit, whereas, all the residential is done via the "sub-game"....Absolutely incredible!

What is sad is how Direct TV, Comcast and all the other cable companies get by with calling their installers....subs.

http://www.bizjournals.com/sacramento/print-edition/2011/07/15/satellite-tv-installers-not-employees.html

That is what started all this classification crap. How can you possibly schedule an exact hour of install for a sub and them not be an employee?

So you did this before they offered an amnesty Rockydog?

I woulda thought the audits would come faster & harder if you switched from w2 to 1099 and not vice versa (VV)

2008 I decided to switch from a private insurer, who had my best interests in mind, to the State workers comp program. I also switched all my employees from 1009 to w2's. I was imeddiately audited by the state, who hit me with $67k bill for underpayment and then the feds stepped in with a $53k bill for underpayed taxes, fines and late fees. YYea, it was probably a dumb move on my part. My CPA said pay it, we don't want to open a can of worms on other issues, and I thought it couldn't get any worse. But I paid it. Everything has been relatively smooth since then and all my employees have been screened and E-verified. I'm as close as I can be to being legal.

Hard to believe that there are ONLY -what?- 17 criteria involved to determine sub vs. employee. With the Gooberm$nt we could easily expect 170, or even 1700. Yet they cannot even figure out the 17. Takes about 10 seconds for most of us

I dunno...Method Of Action maybe?.....It was supposed to be 'MO'....Oops :silly:

MOA? Not sure what it means

I re-read this article. I was looking for the part that said "Just do what you want when you want. But don't you do dare do anything legal"

You know, the real world app

In our world, it takes less time to figure out if someone is a sub or an employee than to type this post. The government however, can never figure it out

There we go! It really is that simple....The proof is in the pudd'n though....Most-probably, nothing will come if it :(

Now, all we need to have...Is the IRS/FICA, (DOL could jump in there as well), actually check SS#'s and enforce employers to NOT employ illegals....The current MOA is an absolute joke.