New IRS Program for Resolving Worker Misclassification Problems

Benefits and Tax Alert


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Businesses often struggle with the issue of whether an individual providing services is properly classified as an employee or independent contractor. If the business has been classifying a worker incorrectly and wants to correct the error, it faces potential back taxes, interest, and penalties and possible collateral issues. In the interest of encouraging businesses to come forward to correct misclassifications, the Internal Revenue Service (“IRS”) on September 21 announced its new program to allow employers to voluntarily reclassify workers as employees without risking additional taxes, interest, and penalties, provided certain payments are made, as discussed in the newsletter.