IRS Announces a Voluntary Worker Classification Settlement Program

As a small business attorney I spend a lot of time counseling clients on the use of independent contractors vs. hiring employees.  As we have discussed in previous posts, the issue of misclassifying employees as independent contractors has been under scrutiny by the IRS and Department of Labor.  If you feel you have erroneously been treating workers as non-employees or as independent contractors, and fear that there may be severe consequences for doing so, the IRS launched a new program that will enable many employers to resolve past worker classification issues by voluntarily reclassifying their workers.

So rather than waiting for an IRS audit, this voluntary classification settlement program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations.

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

Contact your attorney or your tax advisor for more information. Full details are available on the IRS.gov website.