Heightened IRS Scrutiny on Worker Misclassification and Tax Compliance

Preparing for Federal and State Information Sharing; Evaluating Risks and Benefits of the New IRS Compliance Program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, December 1, 2011

Recorded event now available

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This teleconference will provide corporate tax executives with a framework to evaluate the potential risks and benefits of the information-sharing and enforcement cooperation between the IRS, Department of Labor and the states and outline best practices for worker classification and payroll tax compliance decisions.


For the past year, the IRS has aggressively investigated whether companies are properly classifying workers as independent contractors for payroll tax purposes. IRS plans to share information and coordinate enforcement with the DOL and states such as New York and Maryland to raise the bar even higher.

Company federal and state tax professionals must focus even more intensely on evaluating whether independent contractors should be reclassified as employees. That's not always an easy decision, given the complexity of the rules and the unique aspects of each worker's situation.

The IRS is also offering a voluntary classification settlement program, with a fee for part of past payroll obligations to help escape certain tax liability. But, questions remain: Will a rejected application invite audit? Does a statute of limitations extension apply to employment taxes generally?

Listen as our panel of experienced advisors explores the potential ramifications of the IRS/Labor Department/state agency memoranda of understanding and the benefits and risks of the classification settlement offer. The panel will offer their insights to help evaluate when employee or independent contractor is the proper classification.



  1. IRS-Labor Department memorandum of understanding
    1. Information-sharing on possible misclassification of independent contractors
    2. Designed to curb fraudulent filings and reduce employment tax gap
    3. States on board: Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah, Washington
    4. Other states waiting to join: Hawaii, Illinois, Montana, New York
  2. IRS voluntary classification settlement program
    1. Material terms
      1. Applies to federal employment taxes only
      2. Must have consistently treated workers as non-employees, filed all 1099s
      3. Employers that voluntarily reclassify contractors as employees pay fee for part of past payroll obligations
        1. No tax liability for improper misclassification
        2. No audit for these workers for prior years, interest or penalties
      4. Extended statute of limitations to three years
    2. Possible pitfalls
      1. What if IRS doesn’t accept application?
      2. Will three-year limitations period apply to employment taxes generally?
      3. No alleviation of state taxes
      4. Questions about possible disclosure of submission to IRS
  3. Best practices for reviewing contractor vs. employee status
    1. Fact-specificity of each situation
    2. Possible variance in interpretations


The panel will review these and other key questions:

  • Federal and state agency information-sharing: How much of a game-changer is this for corporate taxpayers? What states are on board now, and which are likely to join?
  • The voluntary classification settlement program: What are the terms and benefits of the IRS deal? What are the potential risks and exposures?
  • Evaluating employment status: What steps can corporate personnel take to make informed decisions?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.


Bob Adams
Bob Adams
Managing Director, Tax Services
RSM McGladrey

He leads the firm’s Washington National Tax IRS Practice and Procedure group and advises clients on issues...  |  Read More

Stephen Ashby
Stephen Ashby

Accounting and Auditing Manager
Billups Company CPAs

He has more than 26 years of accounting experience, including more than two decades in public accounting. Much of his...  |  Read More

Michael Gall
Michael Gall

Baker Hostetler

His practice involves tax controversy and litigation, and federal and state employment tax issues for business and...  |  Read More

Wray Rives
Wray Rives

He has more than 20 years of experience in public accounting and private industry. His firm handles business tax...  |  Read More

Tim Ellenwood
Tim Ellenwood
Director of Employment Tax
RSM McGladrey

He has more than 29 years of SALT experience and specializes in federal, state and local employment tax matters. He...  |  Read More

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