Business Management Daily (01/23/12) Angela Rud

The U.S. Internal Revenue Service and state agencies have in the last two years penalized an increasing number of employers for using “independent contractors” who should have been classified as employees. The number of Fair Labor Standards Act case filings involving misclassification challenges has nearly quadrupled since the late 1990s, and was up more than 20% in 2010 alone. The IRS plans to audit 6,000 businesses by 2013 to determine whether taxes, fines, and penalties may be due.

The IRS recently unveiled a new Voluntary Classification Settlement Program that allows eligible taxpayer employers to voluntarily reclassify workers as employees for federal employment tax purposes. The program features partial amnesty for past misclassifications, limiting an employer’s liability.