Tax Law Insights

IRS Voluntary Worker Classification Settlement Program

Employers that have workers which the employer classifies as "independent contractors" (Form 1099) risk having these workers reclassified by the IRS as employees. This classification is a major audit area for the IRS. If the IRS does audit an employer and reclassifies "contractors" as "employees" this will subject the employer to substantial federal employment tax liabilities, penalties, and interest. The employer will also be required to treat the "reclassified" contractors as employees going forward.

If an employer ...