IRS Gives Employers Break On Misclassified Workers

WASHINGTON (AP) - The Internal Revenue Service is offering a break to employers who come clean about wrongly classifying workers as independent contractors to avoid paying federal payroll taxes.

What happens when workers are considered independent contractors?

Employers don't have to pay various taxes, including unemployment insurance taxes, workers' compensation premiums or the employer's share of Social Security and Medicare taxes. Workers also may have fewer rights, including overtime protections.

Employers accepted into a new IRS program must cough up a bit more than 1 percent of the wages paid to the workers for the past year. The IRS says no interest or penalties will be due, and employers will not be audited on payroll taxes related to these workers for earlier years.

The program only covers federal taxes.