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 ...
The IRS announced an important settlement program on September 21, 2011 where the IRS will now give many employers substantial tax relief for treating employees as "independent contractors". Details of the settlement program were provided in Announcement 2011-64, which will officially be published in the Internal Revenue Bulletin 2011-41, to be issued October 11, 2011.
Whether a worker is performing services as an employee or independent contractor depends on the facts and circumstances and is generally determined under a multiple factor common law test focusing on whether the ...