Voluntary Classification Settlement Program May Benefit Eligible Employers

By Joseph M. Donegan on August 24th, 2012

Misclassifying an employee can carry significant consequences for businesses, and the Internal Revenue Service is urging employers to take advantage of a new program to avoid these penalties.

The IRS is cracking down on companies that misclassify employees as independent contractors in an attempt to avoid paying federal FICA taxes and providing benefits to workers. Under the current tax law, employers are exempt from paying the Medicare and Social Security taxes – commonly known as FICA – that they are required to pay for regular employees. In addition, companies are not required to extend benefits, such as healthcare and retirement options, to independent contractors.