IRS advisory board suggests ways to trim misclassifications

If the Internal Revenue Service (IRS) takes its advisory council’s suggestions to heart, you may be reclassifying some workers.
In its 2010 public report, Internal Revenue Service Advisory Council (IRSAC) issues a few recommendations to curb the problem of independent contractor misclassification.
In the past, IRSAC reports have carried a lot of weight with the IRS, so these are a few things you’ll want to keep on your radar.
Waiving prior year taxes
For starters the IRSAC wants the IRS to encourage expanded use of Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
It’s suspected many business owners shy away from using the form to ask the IRS whether a person is a independent contractor or an employee because they believe it’ll increase their chances of being audited.
To increase the use of Form SS-8, the IRSAC suggests that the IRS waive prior year taxes that would apply if an independent contractor was reclassified as an employee — and the new classification was applied retroactively to past years, increasing an employers tax liability.
Expand settlement, compliance programs

The IRSAC also suggested expanding the IRS’s Worker Classification Settlement Program.
Currently, the program is only open to employers under audit.
In addition, the IRSAC recommended sending letters to businesses in high-violation industries offering a voluntary compliance program. A program like that would allow businesses to escape high penalties for past violations if they agreed to correct certain wrongs.
Stay tuned for any official changes the IRS makes.