Pub. 2 2019-2020 |Issue 2

24 penalties on the payments under the VCSP, and will not be audited for employment tax purposes for prior years with respect to the classification of the workers. If you believe that the VCSP would be appropriate for your office or business, you may apply for its benefits using IRS Form 8952. The savings under this program can be substantial. On the other hand, some employers are reluctant to enter the VCSP “amnesty” program for fear of liability under other state and federal laws that do not grant similar leniency, and with a concern that workers might make retroactive claims for previous lost benefits, subjecting the employer to greater liability. The IRS offers a similar, though less generous, program called the Classification Settlement Program, or CSP, for taxpayers who, during pendency of an IRS audit, agree to properly classify misclassified workers. Selling Your Home? Pay Zero Commission for a Limited Time! continued from page 23 Ensuring Compliance. The following are steps business owners and managers can take to ensure proper classification of workers: 1. If a worker is classified as an independent contractor, be sure to issue a Form 1099 to the worker and encourage payment of taxes. Moreover, whenever you withhold employment taxes from workers classified as employees, always pay the taxes on time to the IRS to avoid steep penalties. 2. Be aware that workers, alone or as a class, can file a whistleblower complaint against you if they believe they have been misclassified. They can also file Form 8919 to report to the IRS the failure to withhold Social Security taxes (and thus increase their retirement benefits). Also, be advised that an employer can be held civilly liable for a workplace injury to a worker improperly classified as an independent contractor instead of as an employee. 3. Use IRS Form SS-8 as an internal checklist to help determine worker status and, after weighing the benefits and drawbacks, consider filing Form SS-8 with the IRS for a binding determination in uncertain cases. 4. Consider the safe harbor “Section 530” defense, which offers potential relief from misclassification if certain criteria are satisfied. 5. As circumstances warrant, use VCSP or CSP vehicles to reduce potential liability for misclassification. Remember that other state and federal agencies may not agree with the IRS characterization and vice versa. 6. Seek professional assistance as classification questions arise and don’t risk taking a position that lacks adequate support. 3