A new report issued by the Treasury Inspector General for Tax Administration Office of Audit (TIGTA) and the IRS have determined that employers regularly misclassify millions of workers as independent contractors instead of employees. 

Such employers thus avoid the payment of employment taxes in the short term but in the long run these mistaken classification schemes put these employers at risk of facing substantial fines and penalties from Federal and State level regulators. 

Please note that the IRS now plans to update its policies and procedures to more efficiently target worker classification violations and further enhance compliance with the existing Form SS-8 Determination of Worker Status Program whereby businesses and/or workers can request a determination letter from the IRS regarding a worker's Federal employment tax status as an employee or independent contractor. Note that the SS-8 program received 6,262 such requests in TY2012 alone.

The new IRS enforcement initiative will include a more regular review process of the SS-8 program as well as the formation of an enforcement team seeking new methods for "encouraging" greater employer compliance with worker classification related rulings.