February 15th, 2012 MISCLASSIFIED INDEPENDENT CONTRACTORS—IRS LAUNCHES NEW VOLUNTARY SETTLEMENT PROGRAM

Just over a year ago, we posted a blog entry about the Internal Revenue Service cracking down on employers who improperly classify workers as independent contractors rather than employees, and warned that it may be a costly mistake. 

Recently, as part of a larger “Fresh Start” initiative, the IRS launched a new program which may provide some relief to certain employers looking to resolve past worker classification issues.  That program—the Voluntary Classification Settlement Program (“VCSP”)—allows eligible employers to reclassify the workers as employees and only pay an amount of approximately 1% of the wages paid to the reclassified workers for the past year, with no other interest or penalties.  For further details, including eligibility requirements, please visit the IRS website:  http://www.irs.gov/newsroom/article/0,,id=246203,00.html

If you are concerned that your independent contractors may be misclassified, and are worried about the potential consequences for you in the event of an audit, we highly recommend consulting a knowledgeable attorney or tax professional to see if the VCSP may be a solution.