Government Agencies Helping Small Business Owners Properly Classify Workers

Jan 27, 2012

Were the people working in your shop last year employees or independent contractors? Did you properly classify them when filing your taxes?

In a recent Grow Smart Biz article, Karen Axelton described new initiatives from the IRS and Department of Labor to help reduce misclassification of employees and improve employer compliance.

The Labor Department will be focusing on enforcing laws and auditing employers, according to Axelton, and the IRS has started the Voluntary Classification Settlement Program, which allows business owners to come forward voluntarily and settle their misclassification issues.

Through VCSP businesses can reclassify workers as employees for future tax periods and pay just 10 percent of the employment tax liability that results from this reclassification for the most recent tax year, Axelton wrote.

Also, there are no penalties or interest on the employment tax liability and the IRS won’t audit your business on these workers’ classifications for prior years.

To learn more about VCSP, read the complete Grow Smart Biz article here.