4.23.20. Voluntary Classification Settlement Program (VCSP) Procedures

(1) The Voluntary Classification Settlement Program (VCSP) is an optional program that provides taxpayers that meet the program’s criteria with an opportunity to voluntarily reclassify their workers as employees. The settlement offers limited federal employment tax liability for past non-employee treatment. This program is meant to be easy, quick, and inclusive for taxpayers to provide for future compliance with employment tax laws, while remaining consistent with the program’s objectives and constraints.

(2) VCSP allows taxpayers to voluntarily reclassify workers as employees for federal employment tax purposes. It gives eligible taxpayers that agree to prospectively treat workers as employees’ relief from a federal employment tax audit for past years for those workers being reclassified and gives them partial relief from federal employment taxes owed related to those workers. To participate, the taxpayer must submit an application to participate in the program, meet certain eligibility requirements, and enter into a closing agreement with the IRS.

(1) Employment tax provisions are found at Internal Revenue Code Subtitle C:

• Chapter 21, Federal Insurance Contributions Act (FICA),

• Chapter 22, Railroad Retirement Tax Act (RRTA),

• Chapter 23, Federal Unemployment Tax Act (FUTA),

• Chapter 24, Federal Income Tax Withholding (FITW), and

• Chapter 25, General Provisions relating to employment taxes and collection of income taxes at source.

(2) The Employment Tax Program is governed by Policy Statements and other internal guidance that apply to all Service personnel regardless of operating division. The Policy Statements found in IRM 1.2.1, Servicewide Policies and Authorities, Servicewide Policy Statements, apply to all employment tax issues and examinations. Examiners should review these Policy Statements to properly perform their examination duties.

(3) A website, Search Servicewide Delegation Orders, located at https://irm.web.irs.gov/imd/del/search.aspx provides a searchable list of Servicewide Delegation Orders issued by the Commissioner of the Internal Revenue, or on his or her behalf by either of the deputy commissioners. Delegation Orders pertaining to each IRS business process can be found in IRM 1.2.2, Servicewide Policies and Authorities, Servicewide Delegations of Authority.

(4) IRM 4.23 provides Servicewide instructions for all operating divisions with employees involved with the correct filing, reporting, and payment of employment taxes. IRM 4.23 serves as the foundation for consistent administration of employment taxes by various IRS operating divisions. By providing one source of authority for all operating divisions, the Service greatly reduces philosophical and procedural inconsistencies.

(1) Director, Specialty Examination Policy, is responsible for the procedures and updates addressed in this IRM.

(2) Director, Specialty Examination, is responsible for examination operational compliance.

(3) Chief, Employment Tax Examination, is responsible for ensuring general information about basic employment tax examiner responsibilities.

(1) Program Goals: The processes and procedures provided in this IRM are consistent with the objectives or goals for Employment Tax - Examination that are addressed in IRM 1.1.16.5.3.3, Employment Tax Examination and for Employment Tax Policy, found in IRM 1.1.16.3.3.1.5, Employment Tax Policy.

(2) Annual Review: Employment Tax Policy - Program Manager, is responsible for reviewing the information in this IRM annually to ensure accuracy and promote consistent tax administration.

(1) The following table lists commonly used acronyms and their definitions:

(1) Helpful information sources include:

• The SB/SE Knowledge Management home page for Employment Taxes is Employment Tax Small Business Knowledge Base - Home (sharepoint.com) (https://irsgov.sharepoint.com/sites/ETD-KMT-KB014).

• The Specialist Referral System (SRS) home page https://srs.web.irs.gov/.

• A list of SB/SE Employment Tax Policy Analysts, their contact information and program assignments, are found at Employment Tax Policy Contacts (sharepoint.com). .

• IRM 4.23: IRM sections owned by SB/SE Specialty Examination Policy. Provides Servicewide instructions for employees of all operating divisions involved with the correct filing, reporting, and payment of employment taxes. IRM 4.23 serves as the foundation for consistent administration of employment taxes by various IRS operating divisions.

(2) The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service (IRS), led by the National Taxpayer Advocate. Its job is to protect taxpayers’ rights by striving to ensure that every taxpayer is treated fairly and knows and understands their rights under the TBOR. TAS offers free help to taxpayers, including when taxpayers face financial difficulties due to an IRS problem, when they are unable to resolve tax problems they have not been able to resolve on their own, or when they need assistance to address an IRS system, process, or procedure that is not functioning as it should. TAS has at least one taxpayer advocate office located in every state, the District of Columbia, and Puerto Rico.

(3) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3). For additional information about the TBOR, see www.irs.gov/taxpayer-bill-of-rights or https://irsgov.sharepoint.com/sites/IRSSource/SitePages/Taxpayer-Bill-of-Rights.aspx.

(4) Employment tax examiners should consider the disclosure provisions when preparing agreed and unagreed case reports. For further information, see the Privacy, Government Liaison and Disclosure (PGLD) maintained knowledge base at https://irsgov.sharepoint.com/sites/ETD-KMT-KB003.

(1) To facilitate review, all documents located in the paper case file must be saved to the appropriate taxpayer within RCCMS.

(2) Each document saved within RCCMS will use the following naming convention:

• 100 series: Application and attachments

• 200 series: Correspondence sent to the taxpayer

• 300 series: Correspondence and all attachments received from the taxpayer

• 400 series: Workpapers and IDRS prints

• 500 series: Agreement

(3) Each document name will contain a description of the file content.

(4) The following example is for taxpayer Birch, Inc. (EIN 00-XXXXXXX, Name Control "BIRC"). The TE made phone contact with the taxpayer to secure copies of Form(s) 1099 and the application met all other criteria. The TE prepared and issued the agreement to the taxpayer, which the taxpayer signed and returned with the proper payment.

• 100.VCSP.F8952.XXXXBIRC (file will include all attachments to the Form 8952)

• 300.VCSP.F1099.XXXXBIRC

• 200.VCSP.L5220.XXXXBIRC (file can include the attached agreement)

• 400.VCSP.F9984.XXXXBIRC

• 400.VCSP.WP130.XXXXBIRC

• 400.VCSP.ZZZZZ.XXXXBIRC (include all IDRS prints or other documents needed to support the findings as separate 400 series files, where "ZZZZZ" represents the IDRS command code, for example, AMDISA)

• 500.VCSP.Agreement.XXXXBIRC (not necessary if the agreement was attached to the Letter 5220 above)

• 500.VCSP.SignedAgreement.XXXXBIRC

• 300.VCSP.ScannedPayment.XXXXBIRC

• 400.VCSP.F3244.XXXXBIRC

(5) Each case file will be different and some will require more documents than others. The TE must use the naming convention to make finding documents easier and to assist in the review of the case.

(1) Upon receipt of the application package, the VCSP Assignment Desk will enter the information into the SharePoint VCSP Application Log and perform a review of the Form 8952 to ensure it is complete and processable. See IRM 4.23.20.4.2, Complete Applications, to determine if the application is complete. The VCSP Assignment Desk will document all findings and actions taken on Form 9984 for all VCSP applications received, whether an application is complete or incomplete.

(2) If a check was erroneously submitted with the initial application, the VCSP Assignment Desk will return the check to the taxpayer using Letter 5210, Voluntary Classification Settlement Program Receipt Payment Return, using certified mail with return receipt service.

(1) Only Forms 8952 that provide sufficient information to establish a case will be accepted by CETO. The VCSP Assignment Desk will review the application and accept only those that:

• Provide a name on Line 1 of Form 8952 that matches IRS information. If the name entered on Form 8952 matches the first or second name line from the INOLES, the name is acceptable.

• Provide an EIN on Line 2 of Form 8952 that matches IRS information.

• Provide a valid date for when the worker reclassification will be effective. This should be the beginning date of the employment tax period (calendar year or quarter) for which the taxpayer wants to begin treating the class or classes or workers as employees. See IRM 4.23.20.5, Valid Effective Date - General, to determine what constitutes a valid effective date.

• Provide a signature by an authorized person as defined in the Instructions for Form 8592 under "Who Must Sign." The Form 8952 must be signed by the taxpayer; Form 8952 cannot be signed by a Power of Attorney.

• Include an attachment listing names and Social Security Numbers (SSNs) for all workers who are to be reclassified and who are included in the number entered on the Form 8952, Line 15.

(2) When the VCSP Assignment Desk determines the application is complete, they will:

• Establish case in RCCMS. Refer to the VCSP Desk Guide for step-by-step instructions on establishing a VCSP case within RCCMS.

  Note: RCCMS requires a valid North American Industry Classification System (NAICS) code to allow the case to properly establish. Refer to IRM 4.23.20.8, NAICS Codes, for information on determining the code to use.

• Download Form 9984 into RCCMS. A paper copy of this document should also be placed in the file. The VCSP Assignment Desk, the TE, and manager must document all actions taken in the activity record.

• Scan all documents, forms, and letters and upload into the electronic case established in RCCMS. The files will be saved to the newly established case using the Naming Convention outlined in IRM 4.23.20.3.1, Naming Convention in RCCMS.

• Assign the case in RCCMS to the appropriate TE.

• Update the SharePoint VCSP Application Log with the TE name and date assigned.

• Prepare a paper case file with a folder labeled with the taxpayer name and EIN and give the case file to the assigned TE.

(1) When the VCSP Assignment Desk determines that Form 8952 is incomplete (does not meet one of the criteria listed in IRM 4.23.20.4.2(1)), they will contact the taxpayer in an attempt to obtain correct information or a corrected application. In most cases the VCSP Assignment Desk can make changes to the information contained on the Form 8952 with verbal consent from the taxpayer unless the form is not properly signed. If the form is not signed by an authorized person, a corrected Form 8952 must be obtained. Refer to IRM 4.23.20.6.2, Making Changes to Form 8952, for information on making changes to Form 8952.

(2) If the VCSP Assignment Desk obtains information that makes the Form 8952 complete or they receive a corrected application from the taxpayer, they will follow the steps outlined in IRM 4.23.20.4.2(2). If corrected information is not received, the VCSP Assignment Desk will prepare Letter 5252, Essentials Rejection Letter, marking the box indicating the reason the application cannot be processed and mail it to the taxpayer with the original Form 8952 attached. Enter the date rejected and a short reason for the rejection into the SharePoint VCSP Application Log.

(3) Incomplete applications will not be entered into RCCMS, but a copy will be maintained in a paper case file and filed with rejected applications. An activity record should be maintained in the paper case file to document all actions taken and the date the Letter 5252 was mailed.

(1) VCSP applications may have effective dates as far as a year in advance. For Form 941 quarterly filers, an effective date before the beginning of the calendar quarter in which the Form 8952 is received is never acceptable. If the taxpayer is a yearly employment tax filer, (in other words, Form 943 agricultural employer, Form 944 required annual filer, or Schedule H, household employer), the effective date can never be before January 1 of the year in which the application is received.

(1) Before assigning a case to a TE, the VCSP Assignment Desk will take steps to ensure the application is complete. For more information refer to IRM 4.23.20.4.2, Complete Applications. It is assumed that any case assigned to the TE from the VCSP Assignment Desk is a complete application that can be worked to determine eligibility.

(2) The first step taken by the TE is to review the application for accuracy and take steps to get it corrected, if necessary. Upon completion, the TE will begin the eligibility review to make the final determination as to whether or not the taxpayer should be offered a VCSP agreement. Follow paragraphs (3) through (7) to determine if the application is accurate and can be worked to determine eligibility.

(3) Compare the address on INOLES to the application. If they do not match, the TE will contact the taxpayer to ascertain the correct address. If the Form 8952 is the correct address, the TE will ask the taxpayer if they wish to change the entity address on INOLES to the one reflected on the application. To correct IRS records, send Form 8822-B, Change of Address or Responsible Party - Business , to the taxpayer for return to the TE for processing. If the taxpayer does not want to change the address on IRS records, the TE will document that the taxpayer was asked and record their response on the activity record.

(4) Ensure that "Part II - Contact Person" on the Form 8952 is complete with name, title, and contact information of the person the taxpayer wants CETO to work with during the VCSP process. Refer to the Instructions for Form 8952 for more information on the contact person. This contact person may be a designated POA. If so, the TE should verify that the Form 2848, Power of Attorney and Declaration of Representative, has been properly completed. If not, the TE should not discuss any issues with the POA until corrected. See IRM 4.23.20.6.3, Review of Form 2848, for specific steps when reviewing the Form 2848.

(5) Review "Part III - General Information about Workers to Be Reclassified":

• Line 15: The total number of workers to be reclassified should match the number of names/SSNs provided with the application. If they do not, the TE will contact the taxpayer and address the discrepancy. If the taxpayer does not resolve the discrepancy, reject the application. See IRM 4.23.20.13.3, Unaccepted Agreements, for processing rejected application.

• Line 16: The job title is an appropriate description of the class or classes of workers to be reclassified. Entries should be descriptive enough to determine the type of worker or workers, such as "secretary", "sales", "administrative", "maintenance", etc. Simply entering "independent contractors" is unacceptable.

• Line 17: A valid date is reflected. Generally, the VCSP provides taxpayers an opportunity to reclassify workers for future tax periods. See IRM 4.23.20.5, Valid Effective Date - General.

(6) Review "Part IV - Payment Calculation Using Section 3509(a) Rates" to ensure the amount on line 24 is correct. Contact the taxpayer to resolve any discrepancies.

(7) Review "Part V - Taxpayer Representations" for proper signature. Eligible signers are described on page 2 in the Instructions for Form 8952 under "Who Must Sign."

(8) Form 8952 cannot be used for any issue other than the VCSP process. If the taxpayer asks for other uses or attaches other forms (for example, Form 941, Form 941–X, and so on), contact the taxpayer and explain that the VCSP program does not address these matters. The taxpayer must re-submit the Form 8952 deleting the references or attachments relating to other issues.

(1) Changes to any field on Form 8952 may be made by CETO with the taxpayer’s or the properly designated POA’s verbal consent, except when the Form 8952 is not signed by an authorized person. In those situations, the application must be resubmitted with a valid signature. These corrected forms can be resubmitted via fax.

(2) Any change to Form 8952 that is made with verbal consent will be noted, initialed, and dated on the form by the CETO employee making the correction. The action will also be documented in the activity record with the name and title of the person giving verbal consent, the date, what line(s) are being changed and why.

(3) When contact with the taxpayer cannot be made via telephone to obtain verbal consent to change appropriate information on the Form 8952, Letter 5205, Voluntary Classification Settlement Program Information Request, will be mailed to the taxpayer with the appropriate block(s) completed for the necessary information.

(1) Review Form 2848 for accuracy and to ensure it is being submitted solely for the VCSP program.

(2) Review "Part I - Power of Attorney" to ensure that:

• Line 1: Reflects the same taxpayer name, address, and EIN as on Form 8952.

• Line 2: Matches Part II of Form 8952 if that section was completed. If the taxpayer wants the POA to receive notices and communications, the box in the "Name and address" field must be checked.

• Line 3: All columns are blank except for "Description of Matter." This block must contain only "Voluntary Classification Settlement Program" or "VCSP". The other two columns ("Tax Form Number" and "Year(s) or Period(s)" must be left blank.

• Line 4: Must be checked. If not checked, contact the POA and obtain verbal permission to check this box. When making the change, document this permission and action on the Activity Record. Checking the box means the Form 2848 applies only to VCSP and will not be sent to any Centralized Authorization File (CAF) unit.

  Caution: Line 4 is the only line on the Form 2848 that can be changed with verbal consent. Other errors found on the Form 2848 will require the form to be corrected and resubmitted by the taxpayer.

• Line 7: Signed and dated by the taxpayer.

(3) Ensure that in "Part II Declaration of Representative," each POA named on the Form 2848 completes and signs in the designated area.

(4) Form 2848 must designate an individual, not a firm, as POA.

(5) Do NOT fax Forms 2848 to the CAF unit. These documents are for the VCSP application process only and are not recorded on the IRS systems. The document should be scanned and loaded into RCCMS and the hard copy maintained in the case file.

(6) All communications, notices, and correspondence must be sent to a valid POA with a copy to the taxpayer.

(7) Form 8821, Tax Information Authorization, cannot be used to designate a representative for the VCSP process since it does not authorize the representative to advocate the taxpayer’s position with respect to federal tax laws, to execute waivers, consents, or closing agreement or to otherwise represent a taxpayer before the IRS.

(1) Taxpayers are required to provide a list containing the names and SSNs of workers that they want to reclassify when submitting the application. When the list provided does not contain names and SSNs of the individuals, the TE will resolve the omission with the taxpayer. In some instances, the omission may result in the application being rejected.

(2) If Employer Identification Numbers (EINs) are provided instead of SSNs, this indicates the worker is holding themselves out as a business entity (i.e., partnership, sole proprietorship or corporation). If an SSN is not available, the TE must inform the taxpayer that a business entity cannot be an employee. If the taxpayer meets all other eligibility requirements and is given an agreement, they will be required to treat the worker as an employee, withhold all appropriate taxes, and file a Form W-2, Wage and Tax Statement, on the worker. If no SSN is provided before the Form W-2 is due to be filed, the Form W-2 will be filed with all zeroes as the SSN, which may result in contact from the IRS or SSA.

(3) If the list of workers contains names and either an Individual Taxpayer Identification Number (ITIN) or no Taxpayer Identification Number (TIN), the TE will contact the taxpayer to try to obtain an SSN for the worker. If the taxpayer does not provide an SSN, the TE will tell the taxpayer that, if they meet the other eligibility requirements for a VCSP agreement, they will be required to treat the worker as an employee, withhold all appropriate taxes, and file a Form W-2 on the worker. If no SSN is provided before the Form W-2 is due to be filed, the Form W-2 will be filed with all zeroes as the SSN which may result in contact from the IRS or SSA.

(1) The following workers may be excluded from the VCSP Program. If any of these workers are listed, the TE will discuss the issue with the VCSP Assignment Desk or manager to determine if additional information is necessary.

• Statutory Non-Employees, such as Direct Sellers, Qualified Companion Sitters and Licensed Real Estate Agents. See IRM 4.23.5.7.5, Statutory Non-Employees.

• Certain State and Local Government workers that are covered under a Section 218 Agreement. See IRM 4.23.20.10 , Special Processing Cases, for specific information on how to make this determination.

(2) If the TE is uncertain whether a class of worker can be included in the VCSP application, they will contact their manager or the Policy Analyst assigned the VCSP program to discuss the situation.

(3) The application will be rejected using Letter 5225, Voluntary Classification Settlement Program General Rejection, if it contains an ineligible worker and a new list/application cannot be obtained from the taxpayer. In the "Other" section, indicate the application is being rejected because the request includes an ineligible class of workers and list the specific class of worker that excludes the application from the program.

(1) IDRS command codes BMFOLI and AMDISA will be used to determine if the taxpayer, or a member of the taxpayer’s affiliated group, is under an employment tax audit. If BMFOLI reflects an "–L" freeze for any employment tax master file tax (MFT) code for the taxpayer or a member of their affiliated group, use command code AMDISA to determine the status of the examination(s). See (4) to determine the appropriate steps.

(2) Research the following MFT codes to determine if there is an employment tax audit ("-L" Freeze):

• MFT 01 - Form 941, Employer's Quarterly Federal Tax Return

• MFT 09 - Form CT-1, Employer's Annual Railroad Retirement Tax Return

• MFT 10 - Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return

• MFT 11 - Form 943, Employer's Annual Tax Return for Agricultural Employees

• MFT 14 - Form 944, Employer's ANNUAL Federal Tax Return

• MFT 16 - Form 945, Annual Return of Withheld Federal Income Tax

Note: An "–L" freeze audit indicator on any other MFT module will not affect the VCSP request.

(3) The following table provides actions based on the status code reflected on the AMDISA:

(1) Research command code BMFOLZ to determine if there was any previous employment tax audit(s) for the taxpayer. Use results only for the MFT codes listed in IRM 4.23.20.7.2(2) to make this determination. Results under any other MFT code will not affect the VCSP application. Research of any affiliated group is not necessary.

(2) Use the following steps to determine what steps to take when a previous employment tax audit for the taxpayer is indicated on BMFOLZ:

1. Step 1 – Check BMFOLZ for prior audit history.

Result	Explanation	VCSP Determination
No prior audit history or prior audit history on non-ET modules	No Explanation Needed	Does not affect VCSP eligibility
Prior Audit of any ET return (MFT 01, 09, 10, 11, 14 or 16)	No Explanation Needed	Go to Step 2

2. Step 2 - Determine Disposal Code on prior ET audit.

Result	Explanation	VCSP Determination
Disposal Code 01	Exam was closed a no-change with adjustments	Does not affect VCSP eligibility
Disposal Code 02	Exam was closed a no-change	Does not affect VCSP eligibility
Disposal Code 03/04	Exam was closed agreed	Go to Step 3
Disposal Code 07	Case was closed to Appeals	Go to Step 4
Disposal Code 08	Exam was closed unagreed	Go to Step 5
Disposal Code 10	Exam was closed as unagreed, no response to a Letter 3523, Notice of Employment Tax Determination Under IRC Section 7436. This indicates worker classification may have been an issue.	Go to Step 5
Disposal Code 11	Taxpayer filed a petition in response to the Letter 3523. The case could either be resolved or still pending in Tax Court	Go to Step 5
Any other Disposal Codes, such as 31, 32, 36, 37 (not all inclusive)	Case was closed as a survey or with a non- examined disposal code	Does not affect VCSP eligibility

3. Step 3 - Refer case to Manager or VCSP Assignment Desk to contact Employment Tax-Workload Selection and Delivery (ET-WSD) to check the Classification Settlement Program (CSP) list for a match.

Result	Explanation	VCSP Determination
CSP agreement involving the same class of workers found.NOTE: A CSP is a closing agreement entered into by the taxpayer during an audit when they agree with the examiner’s reclassification of workers.	Taxpayer has already agreed to treat the workers as employees and should be complying with the CSP agreement	Taxpayer is not eligible for a VCSP agreement
CSP agreement involving a different class of worker	No Explanation Needed	Does not affect VCSP eligibility
No CSP agreement found	No Explanation Needed	Go to Step 5

4. Step 4 - Contact Taxpayer to determine the issues appealed.

Result	Explanation	VCSP Determination
Issue did not involve worker classification	No Explanation Needed	Does not affect VCSP eligibility
Issue involved worker classification – but a different class of workers	No Explanation Needed	Does not affect VCSP eligibility
Issue involved worker classification – same class of workers	No Explanation Needed	Taxpayer is ineligible for VCSP agreement

5. Step 5 - Contact Taxpayer to determine issues worked during examination.

Result	Explanation	VCSP Determination
If issue involved worker classification on same class of workers	No Explanation Needed	Taxpayer is not eligible for a VCSP agreement
If case involved worker classification on a different class of workers or did not involve worker classification	No Explanation Needed	Does not affect VCSP eligibility

(1) Anytime a taxpayer is involved in a court proceeding with the IRS, the TE must determine if that proceeding will make the taxpayer ineligible for a VCSP agreement. If a "W" freeze is present on the BMFOLI for the MFT modules listed in IRM 4.23.20.7.2(2), the TE must use the following steps to determine if the taxpayer is eligible for the agreement.

1. Step 1 - Check BMFOLI for "–W" Freeze Code.

Result	Explanation	VCSP Determination
"–W" freeze code on any employment tax MFT module (01, 09, 10, 11, 14, or 16)	Indicates current litigation involving ET returns	Got to Step 2
"–W" Freeze code on any other MFT module or no "–W"freeze on any module	Indicates current litigation other than on an employment tax return or no litigation at all	Does not affect VCSP eligibility

2. Step 2 - Contact Taxpayer to determine issue being litigated.

Result	Explanation	VCSP Determination
Issue involves worker classification	No Explanation Needed	TP is ineligible for VCSP, reject application
Issue does not involve worker classification	No Explanation Needed	Does not affect VCSP eligibility

(1) To be eligible for the VCSP agreement, the taxpayer must have filed all required Form(s) 1099 for the previous three years (or all years for which the class of worker was being paid by the taxpayer if less than three) for all workers in the class of worker that they are seeking to reclassify.

1. The use of the term "worker" on Form 8952 refers to the entire class of worker. Thus, Forms 1099 should have been filed for all individuals in the class (or classes) of workers for the preceding three calendar years, or existence, if less than three.

2. The list provided with the application contains current year workers to be reclassified and may not be the same individuals who received Forms 1099 in previous years.

3. In some situations, the taxpayer may still be eligible for a VCSP agreement even when Form(s) 1099 were not filed. These exceptions include:

(2) Command Code PMFOLS will be used to determine if the taxpayer filed Form(s) 1099.

(3) If PMFOLS shows no Form(s) 1099 filed, the TE must take steps to reconcile the discrepancy by:

1. Using command code IRPTRI to see if the individual documents are posted to the account for the previous three years (or all years for which the worker was being paid by the taxpayer if less than three). Look for documents issued to the individuals listed on the application to determine eligibility,

2. Conducting IDRS research on the individuals listed on the application to determine if they received the appropriate Form 1099 from the taxpayer,

3. Conducting research on an affiliated entity’s EIN if present to determine if the Form(s) 1099 information was filed by them on behalf of the applicant,

4. Conducting research on the SSN of the sole proprietor if the business files as such to see if the Form(s) 1099 were filed using that number, or

5. Contacting the taxpayer to ask about Form 1099 compliance and request copies of the Form(s) 1099 for the individuals listed for the previous three years (or all years for which the worker was being paid by the taxpayer if less than three).

   Note: When making contact with the taxpayer to resolve an apparent non-filing discrepancy, the TE should ask them to verify how they filed the Form(s) 1099 with the IRS (that is e-file or paper submission). If the taxpayer says they filed the form(s) on paper, ask them if they have documentation, such as a certified mail receipt, that verifies filing. If so, they should provide this information when sending copies of the Form(s) 1099.

(4) If PMFOLS from the three most current available years show Form(s) 1099 were filed, but the number or amounts reflected for the Form(s) do not support the amounts on lines 15 and 18 of Form 8952, the TE will take steps to reconcile this discrepancy by researching IDRS to see if the Form(s) 1099 are available on the IRPTRI command code from the most recently complete calendar year. Previous year’s Form(s) 1099 are not available on PMFOLS until sometime during the late spring or early summer of the following year but may be reflected on IRPTRI earlier.

(5) If neither IRPTRI nor PMFOLS information is available to reconcile the amounts on Form 8952, the TE will contact the taxpayer and ask them to provide copies of the forms that were filed for the workers being reclassified.

(6) If the taxpayer does not submit the requested documents or the amounts on the Form 8952 cannot be resolved, reject the application.

(1) A taxpayer that is a member of an affiliated group per IRC 1504(a) is considered to be under employment tax audit for purposes of the VCSP if any of its members are under employment tax audit (Announcement 2012–45).

(2) When Form 8952 indicates that there are related subsidiaries (or when INOLES reflects related entities) and IDRS research shows that any of these entities has an open employment tax audit, reject the VCSP application and close the case off RCCMS. (See IRM 4.23.20.7.7.2, Accounts in Status 03 or 26, for steps in determining whether or not there is an open employment tax audit).

(1) When a taxpayer signs either Form 8952 or the VCSP agreement, they are certifying that there is currently no dispute between the taxpayer and the IRS as to whether the workers involved are non-employees or employees for Federal Employment tax purposes. As discussed previously, any taxpayer (or member of the affiliated group) currently open for an employment tax audit will be rejected.

(2) A taxpayer may also be in dispute with the IRS concerning worker classification if IRS Collection is working on the case. Collection may be attempting to secure delinquent employment tax returns or taxes owed that relate to a worker classification issue. If research indicates involvement by Collection for the taxpayer making the application, the TE must determine what specific issues are involved before proceeding with the eligibility determination.

(1) Upon receipt of the signed agreements, ensure:

1. Both copies were returned and are signed; either the taxpayer or authorized POA may sign the agreement.

2. There are no additions, deletions, or modifications to the agreement. If the agreement was altered, contact the taxpayer or POA to inform them it is not acceptable and that two new agreement forms will be sent. If they refuse to sign the new agreement, reject the application using Letter 5225. In the "Other" box indicate "The application is being rejected because the signed agreement was altered and a new agreement was not signed and returned" and close the case.

3. Proper payment was enclosed; payment must be made by a certified or cashier’s check. Ensure that the dollar amount of the check matches the agreement. Any issues with the check must be resolved with the taxpayer and appropriate payment received before sending the application to the manager for signature.

(2) If payment is received in an unacceptable form, i.e., a personal or a business check, it will be stamped as non-negotiable and returned to the taxpayer using Letter 5756, VCSP Check Rejection. Use certified mail with return receipt to return all unacceptable payments to the taxpayer.

(3) If payment is received for an incorrect amount (does not match agreement or application), the TE will take the following actions-

1. Contact the taxpayer to ask them to submit the correct amount and hold the case until proper payment is made.

2. If the taxpayer does not submit a new payment in the proper format, reject the application using Letter 5225 and return the check that was submitted with the letter. Stamp the check as "non-negotiable". In the "Other" box, enter "The application is rejected because no valid payment was received" and close the case. Use certified mail with return receipt to return incorrect payment to the taxpayer.

(1) Upon receipt of a signed agreement with the correct payment, the TE will complete the case for final closure.

(2) After the TE has received verification that payment was processed appropriately (IRM 4.23.20.13.2.1, Signed Agreement – Review for Acceptance), the TE will place the entire paper case file in the group manager’s in-box. The group manager will review the case file, sign both copies of the agreement, and return them to the TE.

(3) The TE will send one copy of the signed agreement to the taxpayer using Letter 5230, Voluntary Classification Settlement Program Signed Agreement Return, and upload copies of both the agreement and letter to RCCMS.

(4) The TE will prepare the paper case file for final closure, close the case as "accepted" in RCCMS, and forward the paper case file to the manager for final review and closure.

(1) The TE will call the taxpayer to make arrangements to secure a proper agreement and/or payment, and stamp the check as non-negotiable and return it to the taxpayer using Letter 5756 by certified mail and return receipt if the agreement:

• Is not signed,

• Has been altered with any additions, deletions or any modifications,

• Does not include a certified or cashier’s check, or

• Includes a certified or cashier’s check for the incorrect amount.

(2) The TE will allow the taxpayer or representative 30 days after the initial contact to provide the corrected agreement or payment. If the taxpayer or representative fails to respond by the end of the 30 days, the TE will call the taxpayer or POA to make a final request for a correctly signed agreement or payment. An extension of time, up to 30 days, may be provided if requested.

(3) If the taxpayer has not returned the agreement (or provided full payment) after 30 days (including any extension), the TE will reject the application by sending Letter 5225. In the "Other" section, indicate "The application is being rejected because a properly signed agreement was not received" or "The application is being rejected because proper payment was not received". Close the case as "Rejected" in RCCMS and forward the case file to the manager for final review and closure.

(4) If the taxpayer sends in the signed agreements after the case was closed, notify the VCSP Assignment Desk or Manager; the case will need to be retrieved and re-assigned to the TE for resolution.