The IRS recently announced a new "Voluntary Classification Settlement Program" (VCSP), which allows employers to correct worker classification errors and pay significantly reduced penalties, without having to go through either an examination or complicated administrative procedures.

Proper classification of workers, as employees or independent contractors, is always an issue for both employers and the workers themselves. One of the major effects of classifying an individual as either an employee or a contractor is employment tax liability on the part of the "employer." An employer who finds that employees have been misclassified as contractors may wish to correct that error, but doing so will usually expose the employer to penalties with respect to employment taxes and withholding failures and the employer may not be willing to take on those liabilities, especially for prior years.

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