by Mark Jones
Yes, this is a blog post about the IRS. So, understandably, I’m afraid I might lose you before we even begin. Please don’t check out too soon, though, because here’s the bottom line: The IRS actually has a new program designed to save you hassle and money.
Good, you’re still reading. Now let’s talk about why this program might be important to your ministry.
In the nonprofit world, especially in churches, it isn’t uncommon to find misclassification of workers—usually meaning an employee is mistakenly classified as an independent contractor. Why is it a problem? According to the IRS, “Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.”
The new IRS program allows employers to resolve past worker classification mix-ups. By making a minimal payment to cover past payroll tax obligations, employers can come back into compliance rather than waiting for a dreaded and painful IRS audit.
If your ministry is eligible for this new program, you can obtain substantial relief from past-due federal payroll taxes. Once accepted into the program, you 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 are due, and you will not be audited on payroll taxes related to these workers for prior years.
(Need help determining if you have classification mix-ups? In a blog post I wrote addressing the issue last year, I included a resource from the IRS to help distinguish employees from independent contractors.)
There you have it. If you discover your ministry has employees who are classified as independent contractors, take advantage of this program to avoid hassle and expense and get into compliance. After all, how often does the IRS try to make things easier for you?