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Voluntary Classification Settlement Program

On December 17, the IRS released Announcement 2012-45 and Announcement 2012-46,  providing additional information on the Voluntary Classification Settlement Program (VCSP). Information had previously been provided in Announcement 2011-64. The VCSP is a new program developed by the IRS that allows taxpayers to voluntarily reclassify their workers as employees for future tax periods for employment tax purposes. Under the VCSP, a taxpayer will pay 10 percent of the amount of employment taxes calculated under the reduced rates of section 3509(a) of the Internal Revenue Code for the compensation paid for the most recent tax year to the workers being reclassified under the VCSP. In addition, the taxpayer will not be liable for any interest and penalties on the payment under the VCSP, and will not be audited for employment tax purposes for prior years with respect to the worker classification of the workers. Taxpayers may apply for the VCSP using Form 8952, Application for Voluntary Classification Settlement Program.

The IRS has developed a set of FAQs explaining eligibility for and consequences of entering into the VCSP.

Page Last Reviewed or Updated: 21-Mar-2013