New Voluntary Compliance Program For The Reclassification Of Workers

As previously detailed in The Working World, Issue 8, June 2010, the misclassification of an individual service provider as an independent contractor or an employee can have serious implications for employers. One of the risks associated with the misclassification of employees as independent contractors in the US is liability for unpaid federal, state and local income tax withholding, social security and Medicare contributions, and unpaid workers' compensation and unemployment premiums, together with attendant penalties and interest for the unpaid amounts.

To help and encourage businesses to correct past misclassification of workers, the US Internal Revenue Service (IRS) recently established a new voluntary compliance program that will enable employers to voluntarily reclassify their workers as employees for future tax periods with minimal tax liability for past non-employee treatment. The IRS is calling the program the Voluntary Classification Settlement Program,