The Internal Revenue Service says that it will allow businesses that have misclassified workers as independent contractors to reclassify workers with only a small penalty.
Regulators say that they will be much more vigilant of employee misclassification in the future. Employers who classify workers as independent contractors can have increased costs by around 20-30%, and some say that the confusing rules over what constitutes an employee means that businesses make honest mistakes. The IRS says that it expects most applicants to the program will be smaller businesses. The new Voluntary Classification Settlement Program is part of the IRS larger “Fresh Start” initiative to get more businesses and individual taxpayers into tax compliance.
