New IRS Employee / Independent Contractor Classification

By: Robert J. Milford

Are you an employee or an independent contractor? The answer to this question has major ramifications both in terms of payroll taxes as well as eligibility for employee benefits. The IRS has been conducting many audits in the last few years designed solely to answer this question. If a worker is improperly classified as an independent contractor rather than an employee, the IRS will seek to impose substantial taxes, penalties and interest on the employer. The construction industry is one of the industries that has been targeted for audits by the IRS.

On Wednesday of this week, the IRS announced a New Voluntary Worker Classification Settlement Program. This program will allow many employers to resolve past worker classification issues at a low cost (about one percent (1%) of the wages paid to the reclassified workers for the past year). More information about this program can be found at,,id=246203,00.html.  If you have any potential liability regarding this issue, this program could be a wonderful opportunity to resolve the issue at a very reasonable cost. If you wish to discuss this issue and the various alternatives available to you, we would be glad to assist.