For some business owners, concluding whether a worker is an employeeor an independent contractor can be complicated. Generally, you must
withhold income taxes, withhold and pay social security and Medicare taxes and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments made to independent contractors.
There is a misconception that you may be able to choose which classification works best for your situation. However, the facts and circumstances impose the conclusion. You should work with your tax professional at Accountability Services in determining whether or not you are treating your workers correctly. If you've been treating your workers as contractors when they should be treated as employees, you may be eligible for a new transition program the IRS has implemented.
The Voluntary Classification Settlement Program (VCSP) is an IRS program that provides an opportunity for taxpayers to reclassify their workers as employees for employment tax purposes for future tax periods with partial relief from federal employment taxes. The program applies to taxpayers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to prospectively treat the workers as employees.
Give us a call today to find out if you're eligible for this IRS program.