Businesses Face Pressure to Label Employees Correctly Following IRS Reclassification Program

By Frank L. Brunetti on May 30th, 2012

Employers are under greater scrutiny from state and federal tax agencies to classify their employees correctly to avoid fines, penalties and, in some cases, stop-work orders.

After the Internal Revenue Service rolled out its Voluntary Classification Settlement Program (VCSP), businesses had the opportunity to come forward and avoid hefty penalties if they had misclassified workers as independent contractors. The program allows employers to change a worker’s status from independent contractor to employee for future tax periods without incurring penalties or interest for the past misclassification.