The IRS is showing some additional leniency to firms that have misclassified workers as independent contractors for employment tax purposes. It recently announced that it will give employers until June 30, 2013, to sign up for the “Voluntary Classification Settlement Program” (VCSP).
To be eligible for the VCSP, an employer must have consistently treated the workers as independent contractors and provided them with Form 1099 for the prior three years. Under the extended VCSP deal, an otherwise eligible employer will have to pay a slightly higher penalty and a small fine for failing to file timely 1099s for the workers in question. (IRS Announcement 2012-46)