Vision Payroll

September 23, 2011

Question of the Week: How Do I Apply for the VCSP?

How Do I Apply for the VCSP?
How Do I Apply for the VCSP?
This week’s question comes from Allan, a small-business owner.

Allan asks…

I read about the Voluntary Classification Settlement Program (VCSP). I have some workers who might need to be classified as employees. How do I apply for the VCSP?

Answer: Employers may use Form 8952, Application for Voluntary Classification Settlement Program (VCSP), to apply for participation in the VCSP.

Eligibility Requirements

The instructions to Form 8952 list the following eligibility requirements to participate in the VCSP:

  1. Want to voluntarily reclassify certain workers as employees for federal income tax withholding, Federal Insurance Contributions Act (FICA), and Federal Unemployment Tax Act taxes (collectively, federal employment taxes) for future tax periods.
  2. Be presently treating the workers as non-employees.
  3. Have satisfied any Form 1099 requirements for each of the workers for the 3 preceding calendar years ending before the date Form 8952 is filed. A taxpayer will have satisfied its Form 1099 filing requirements if it provided Forms 1099 to the workers being reclassified for the period of time that the workers worked for the taxpayer. For example, a taxpayer who has only been in business for two years will have satisfied its Form 1099 filing requirements if it provided the workers being reclassified with Forms 1099 for those two years.
  4. Have consistently treated the workers as non-employees.
  5. Have no dispute with the Internal Revenue Service (IRS) as to whether the workers are non-employees or employees for federal employment tax purposes.
  6. Not be under examination by the IRS.
  7. Not be under examination by the Department of Labor (DOL) or any state agency for the proper classification of the workers.
  8. Not have been examined previously by the IRS or the DOL for the classification of workers; or,
  9. If the taxpayer has been examined previously by the IRS or the DOL for the classification of workers, taxpayer must have complied with the results of the prior examination.

In addition, as part of the VCSP, a taxpayer must agree to extend the period of limitations on assessment of employment taxes for 3 years for the first, second, and third calendar years beginning after the date the taxpayer elects to begin treating the workers as employees under the VCSP closing agreement. The taxpayer has the right to refuse to extend the period of limitations on assessment or to limit the extension to particular issues or to a particular period of time. However, if the taxpayer refuses to extend the period of limitations on assessment or provides only a limited extension, the IRS will not execute the VCSP closing agreement.

Filing Deadline for Form 8952

Although there is no absolute filing deadline for Form 8952, it should be filed at least 60 days before the date you want to begin treating the class or classes of workers as employees.

No Payment Due with Form 8952

Although you will be required to calculate the amount of the payment to be paid, the amount should not be sent with Form 8952. It must be sent with the signed closing agreement.

Contact Vision Payroll Today for Information on Form 8952

Contact Vision Payroll for further information on Form 8952.

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