The IRS has always been said to have a focus on businesses incorrectly treating employees as independent contractors. They do not want businesses to unjustly avoid paying the payroll taxes associated with an employee. In late September, the IRS launched a voluntary worker reclassification settlement program. What the program entails is voluntarily coming forward and saying I made a mistake in the past and I want to move forward the right way. Rather than being liable for all the payroll related taxes and penalties for the past 3 years, an employer would pay 1% of the wages for the past year to the IRS as part of the settlement program. As part of the agreement the IRS agrees not to audit you for payroll taxes for the prior years.
This program is another indication that the IRS is focusing on employee vs. contractor issues. If you find yourself in a situation where you have improperly classified people in the past, I really encourage you, whether you decide to enroll in the program or not, to handle their classification correctly moving forward. If you find yourself in this situation you should take a look at the program and decide if it is right for your situation.