IRS Patrol – IRS Announces New Voluntary Worker Classification Settlement Program; Past Payroll Tax Relief Provided to Employers Who Reclassify Their Workers as Employees

Original caption: Farm, farm workers, Mt. Will...

Worker or Contractor that is the question

If you or your clients think there might be an issue with the classification of  employees – that is, are your workers independent contractors or not, now is the time to look into correction.

WASHINGTON – The Internal Revenue Service  launched a new program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.

This new program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.

This is part of a larger “Fresh Start” initiative at the IRS to help taxpayers and businesses address their tax responsibilities.

“This settlement program provides certainty and relief to employers in an important area,” said IRS Commissioner Doug Shulman. “This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”

The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.

To be eligible, an applicant must:

  • • Consistently have treated the workers in the past as nonemployees,
  • • Have filed all required Forms 1099 for the workers for the previous three years
  • • Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers

Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.

Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.

Full details, including FAQs, are available on the Employment Tax pages of IRS.gov, and in Announcement 2011-64, posted [September 21, 2011].

Guidance – Nonresident Alien Employees New Rules in Determining Income Tax Witholding

Notice 2009-91 provides guidance to employers paying wages to nonresident alien employees for services performed within the United States. The notice indicates that effective for wages paid on or after January 1, 2010, new rules will be used in determining the amount of income tax to be withheld from the wages of nonresident alien employees performing services within the United States. These new rules will be set forth in the new revision of Publication 15 (Circular E), Employer’s Tax Guide, and other IRS publications.
Notice 2009-91 will appear in IRB 2009-48, dated Nov. 30, 2009.

California Franchise Tax Board Reminds Us That Your Third Estimated Tax Payment is Due September 15

Your third 2009 quarterly estimated tax payment is due by September 15, 2009.

The FTB has a free Web Pay service to easily pay your estimated tax online. You will need the following to pay online:

Your social security number

The last name you used when you filed your 2007 income tax return.
Your bank account number and bank routing number.

Don’t want to use Web Pay?

View all your payment options.

If you mail a check or money order, be sure to include Form 540-ES, Estimated Tax for Individuals, with your payment.

Federal Minimum Wage Increases to $7.25

Posted by The United States Department of Labor on their web site at The federal minimum wage.

The federal minimum wage for covered, nonexempt employees is $5.85 per hour effective July 24, 2007; $6.55 per hour effective July 24, 2008; and $7.25 per hour effective July 24, 2009.

The federal minimum wage provisions are contained in the Fair Labor Standards Act (FLSA), which is administered and enforced by the U.S. Department of Labor (DOL) Employment Standards Administration’s Wage and Hour Division. Many states also have minimum wage laws.

In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.

The FLSA contains some exceptions (or exemptions) from the minimum wage requirement. Some exceptions apply to specific types of businesses and others apply to specific types of work. It also provides for the employment of certain individuals at wage rates below the minimum wage. See subminimum wages.

Wages required by FLSA are due on the regular payday for the pay period covered. Deductions made from wages for such items as cash or merchandise shortages, employer-required uniforms, and tools of the trade, are not legal to the extent that they reduce the wages of employees below the minimum rate required by FLSA or reduce the amount of overtime pay due under FLSA.

The FLSA does not provide for wage payment or collection procedures for an employee’s wages or commissions in excess of those required by the FLSA. However, some states do have laws under which such claims may be filed.

Federal employees are subject to additional rules enforced by the Office of Personnel Management

It should also be noted that there are a number of employment practices that the FLSA does not regulate. For example, FLSA does not require:

vacation, holiday, severance, or sick pay;
meal or rest periods, holidays off, or vacations;
premium pay for weekend or holiday work;
pay raises or fringe benefits; and
a discharge notice, reason for discharge, or immediate payment of final wages to terminated employees.


Employment Law Guide – Minimum Wage and Overtime Pay – Describes the statutes and regulations administered by DOL that regulate minimum wage and overtime pay.

Questions and Answers About the Minimum Wage – Answers questions ranging from “how often does the minimum wage increase” to “who ensures that workers are paid at least the minimum wage?”

Minimum Wage Laws in the States – Provides a clickable map that tells you what the minimum wage laws are in each state.

Chapter 30 – Wage and Hour Division’s Field Operations Handbook (PDF) – Discusses records, minimum wages, and the payment of wages.

Filing a complaint – DOL’s Wage and Hour Division manages complaints regarding violations of the various laws and regulations it administers. To file a complaint concerning one of these laws, contact your nearest Wage and Hour Division office or call the Department’s Toll-Free Wage and Hour HelpLine at 1-866-4-US-WAGE.

Coverage Under the Fair Labor Standards Act (FLSA) – Provides general information about those covered by the FLSA.

Hours Worked Under the Fair Labor Standards Act (FLSA) – Provides general information concerning what constitutes compensable time under the FLSA.

Youth Minimum Wage – FLSA – Answers a variety of questions about the minimum wage, including the subminimum wage.

Minimum Wage, Recordkeeping, and Child Labor Requirements of U.S. Law – Provides general information concerning federal minimum wage, recordkeeping and child labor requirements that apply to foreign commercial vehicle operators and their helpers who work in United States territory.

Comprehensive FLSA Presentation (Microsoft® PowerPoint®)
elaws Fair Labor Standards Act (FLSA) Advisor – Addresses key wage and hour topics, including minimum wage requirements.

Fair Labor Standards Act (FLSA) Minimum Wage Poster – Describes the requirement that every employer of employees subject to the FLSA’s minimum wage provisions must post a notice explaining the Act. (Español) (Chinese)

Every covered employer must keep certain records for each non-exempt worker. The Fair Labor Standards Act (FLSA) requires no particular form for the records, but does require that the records include certain identifying information about the employee and data about the hours worked and the wages earned. For a listing of the basic records that an employer must maintain, see the FLSA recordkeeping fact sheet.

Prior to paying an employed person the subminimum wage, as allowed under certain provisions of the FLSA, employers may have to apply for a certificate from the U. S. Department of Labor. See the form instructions page for additional information.

The Fair Labor Standards Act (FLSA) – Establishes minimum wages, overtime pay, record keeping, and child labor standards for private sector and government workers.
29 CFR Part 531 – Regulations on wage payments under the FLSA.

State Labor Offices – When the state laws differ from the federal Fair Labor Standards Act (FLSA), an employer must comply with the standard most protective to employees.
State Labor Laws

Employment Standards Administration (ESA) Wage and Hour Division 200 Constitution Avenue, NWRoom S-3502 Washington, DC 20210 Contact WHD Tel: 1-866-4USWAGE (1-866-487-9243) TTY: 1-877-889-5627Local Offices

For questions on other DOL laws, please call DOL’s Toll-Free Help Line at 1-866-4-USA-DOL. Live assistance is available in English and Spanish, Monday through Friday from 8:00 a.m. to 8:00 p.m. Eastern Time. Additional service is available in more than 140 languages through a translation service. Tel: 1-866-4-USA-DOL TTY: 1-877-889-5627
*Pursuant to the U.S. Department of Labor’s Confidentiality Protocol for Compliance Assistance Inquiries, information provided by a telephone caller will be kept confidential within the bounds of the law. Compliance assistance inquiries will not trigger an inspection, audit, investigation, etc.

State map

States with minimum wage rates higher than the Federal

American Samoa has special minimum wage rates

States with no minimum wage law

States with minimum wage rates the same as the Federal
States with minimum wage rates lower than the Federal

IRS Tips For Recently Married Taxpayers

If you have recently gotten married or plan to get married in the near future, the IRS has some tips to help you avoid stress at tax time.

1) Notify the Social Security Administration – Report any name change to the Social Security Administration, so your name and SSN will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security card at your local SSA office. The form is available on SSA’s Web site at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices.
2) Notify the IRS – If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from the IRS website IRS.gov or order it by calling 800–TAX–FORM (800–829–3676).

3) Notify the U.S. Postal Service – You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
4) Notify Your Employer – Report any name and address changes to your employer(s) to ensure receipt of your Form W-2, Wage and Tax Statement after the end of the year.
5) Check Your Withholding – If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status.

6) The IRS Withholding Calculator will even provide you with a new Form W-4, Employee’s

Withholding Allowance Certificate you can print out and give it to your employer so they can withhold the correct amount from your pay.
IRS Withholding Calculator
Form 8822, Change of Address

Now is a Good Time to Check Your Withholding to Avoid a Tax Surprise

With 2009 nearly half over, the Internal Revenue Service reminds individual taxpayers there is no better time to check their 2009 federal income tax withholding levels to make sure they do not face any surprises when returns are due next spring.
The Making Work Pay Credit lowered tax withholding rates this year for 120 million American households. However, particular taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is withheld: multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers and pensioners.
Failure to adjust your withholding could result in potentially smaller refunds or may cause you to owe tax rather than receive a refund next year. So far in 2009, the average refund amount is $2,675 and 79 percent of all returns received a refund.
Because retirees typically have withholding from their pension payments, pension plan administrators or pension payors should be aware of the optional adjustment procedure for pension withholding announced in Notice 1036-P, Additional Withholding for Pensions for 2009.
Social security beneficiaries, supplemental security income recipients, disabled veterans and railroad retirees that receive this year’s one-time $250 economic recovery payment should be aware that the Making Work Pay credit will be reduced by the $250 payment amount. They may also want to review their withholding.
The IRS withholding calculator on IRS.gov can help a taxpayer compute the proper tax withholding. The worksheets in Publication 919, How Do I Adjust My Withholding?, can also be used to do the calculation. If the result suggests an adjustment is necessary, the taxpayer should submit a new Form W-4, Withholding Allowance Certificate, to his or her employer or adjust the amount of quarterly tax paid.
In addition, the IRS reminds unemployed workers that the first $2,400 of unemployment benefits they receive during 2009 are tax-free for federal income tax purposes. People who expect to receive more than that should consider having tax withheld from their benefit payments in excess of $2,400. Use Form W-4V, Voluntary Withholding Request, or the equivalent form provided by the payer to request withholding to begin or end.
Taxpayers should visit IRS.gov for more information about how to adjust federal income tax withholding. The Web site also has details on various tax incentives in the American Recovery and Reinvestment Act as well as downloadable forms and publications. Free tax forms and publications are also available by calling 1-800-TAX-FORM (1-800-829-3676).
The Making Work Pay Credit
Notice 1036-P, Additional Withholding for Pensions for 2009
IRS withholding calculator
Publication 919, How Do I Adjust My Withholding?
Related News Releases and legal guidance
Publication 4766, Making Work Pay Credit and Form W-4 Withholding Certificate
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