The Internal Revenue Service says that it will allow businesses that have misclassified workers as independent contractors to reclassify workers with only a small penalty. Regulators say that they will be much more vigilant of employee misclassification in the future. Employers who classify workers as independent contractors can costs by around 20-30%, and some say that the confusing rules over what constitutes an employee means that businesses make honest mistakes. The IRS says that it expects most applicants to the program will be smaller businesses because of their looser hierarchy. The announcement came after the Labor Department announced a partnership with states to cut down on violations earlier this week.
See "IRS Gives Employers a Break on Payrolls", Laura Saunders and Melanie Trottman, The Wall Street Journal, September 21, 2011