Feds offer amnesty for contractor misclassification

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in Employment Law,Human Resources

If you’ve been worried that some of your workers may be incorrectly classified as independent contractors, but leery about opening a legal can of worms to fix potential problems, Uncle Sam is offering to cut you a break.

Under a new program, the IRS is willing to waive fines and interest penalties for employers that reclassify as employees any workers currently misclassified as contractors. The partial amnesty is part of the IRS’ new Voluntary Classification Settlement Program (VCSP), which was announced Sept. 21.

The trade-off: Instead of paying penalties and interest for misclassifying workers, VCSP participants will be liable for just over 1% of the wages paid to those reclassified workers for the past year. Even better: No penalties or interest will be due, and the IRS will back off on audits related to these workers for earlier years.

That’s a strong incentive, because the U.S. Department of Labor and the IRS (plus officials in 11 states) have begun sharing information in an attempt to identify misclassified employees.

Learn more about the VCSP—and find out if your organization qualifies—at www.theHRSpecialist.com/VCSP.

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