The Classification Settlement Program can provide relief for your employment tax woes.
The CSP allows you and the IRS tax examiners to resolve worker classification cases early in the audit process. The procedures also ensure that if you qualify for Section 530 relief, the Section 530
relief procedures will be properly applied. h. In order to qualify for the CSP, you must satisfy the reporting consistency requirement of the
three-part test for Section 530 safe harbor relief. The big deal here: you must have filed all required 1099s for the independent contractors disputed by the IRS. Generally, you will qualify for the CSP if you have timely filed all required 1099s for the workers that you have
misclassified as independent contractors. If you failed to file the required 1099s, you will not qualify for the CSP.
The CSP pertains only to worker classification issues, and not to any other wage issues. It is important to remember that CSP agreements are closing agreements6 that bind the IRS and you to prospective tax treatment for future tax periods.
The CSP is an offer from the IRS allowing you to settle your employment tax assessment, typically for an amount less than or equal to a single year’s tax assessment.
The IRS Classification Settlement Program offers a chance to settle your employment tax debt due to worker misclassification if you do not qualify for Section 530 relief.
1)Because the IRS requires reporting consistency in order for you to qualify for the CSP, you absolutely need to timely file your 1099s every year for your independent contractor workers.
2) In most cases, the IRS examiner is required to present a CSP offer to you in the course of the audit if you qualify for the CSP.
3)You have the option of either accepting or rejecting a CSP offer.
4)CSP agreements are closing agreements that are binding for future tax periods.
5)CSP agreements typically result in a substantial reduction of assessed employment taxes, especially if you misclassified workers over several years.
6)Your worker classifications for federal tax purposes do not have to match your classifications for state law purposes.
7)You may qualify for more than one CSP offer if several classes of workers are at issue.