IRS Eases Rules for Employers

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(Bloomberg) — The Internal Revenue Service is giving companies that have been misclassifying employees as independent contractors a chance to pay a fraction of back taxes to avoid interest, penalties and audits for previous years. Under the program announced today by IRS Commissioner Douglas Shulman, U.S. companies would have to agree to treat the workers as employees going forward and pay 10 percent of the previous year’s payroll taxes. The program is open to employers of all sizes, though Shulman said he is trying to encourage smaller businesses to participate.  “A lot of our job is to make sure that we provide clarity for the vast majority of people that are trying to get it right,” Shulman said on a conference call with reporters today. Worker misclassification is a complex area of the tax code without clear rules to guide businesses, Shulman said. Since 1978, Congress has prohibited the IRS from issuing general clarifying regulations.

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