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Producers Take Advantage of IRS Forgiveness Program

Original publish date: March 20, 2013

Good news for production companies concerned about prior misclassification of workers as independent contractors: the Internal Revenue Service has beefed up its Voluntary Classification Settlement Program to be even more beneficial to employers. The program was launched in 2011 to encourage employers to start properly classifying employees who had previously been claimed as independent contractors (paid with 1099’s). The settlement program allows taxpayers who were treating workers as independent contractors to now treat them as employees, without incurring stiff penalties and fines for past infractions.

The IRS has now relaxed some eligibility requirements and extended the program until June 30, 2013. An example of increased eligibility is that the program can now be used by employers who are currently under IRS audit, unless it is specifically an employment tax audit. The IRS has also eliminated the previous stipulation that required users of the program to extend the period of limitations on assessment of employment taxes.

To take advantage of the program, the settlement requires employers to pay just 10% of the employment tax liability from the most recent tax year for the reclassified workers, with no interest or penalties. In exchange for the advantageous terms, the employer agrees to treat that class of workers as employees for all future tax years going forward.

“This is an incredible break for the entertainment industry,” says veteran film and TV payroll consultant Shelley Wolfe. “In the eyes of the government, there are almost no independent contractors in our industry. Studios and production companies have been hit with massive audits and paid millions to the IRS in back penalties for misclassifying crew members. This program gives employers a once-in-a-lifetime ‘get out of jail free’ card. If you have ever paid a crew member as an independent contractor, do yourself a huge favor and look into this program.”

Over 1,000 employers have taken advantage of this program and switched their workers from independent contractors to employees. Learn more about the process here. To speak to a payroll consultant about converting your independent contractors to employees, call (866) 429-9316.

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