The Internal Revenue Service (IRS) has commenced a program by which companies can admit to having misclassified workers as independent contractors and settle up by paying a portion of back taxes owed, thereby avoiding most penalties and fees assessed during an audit.

There are strings attached, of course. The company applying for the amnesty cannot be undergoing any current IRS or Department of Labor (DOL) audit over its classification of workers.

The plan is called the Voluntary Classification Settlement Program and was announced just this past week.

Under terms of the program, the organization agrees to pay 10 percent of otherwise applicable employment tax for the immediately preceding year, using Section 3509's reduced rates for cases of honest misclassification. No penalties or interest for that year may be imposed and all other prior years are "closed" for employment tax audit purposes. However, the organization must agree to an extended statute of limitations (six years as opposed to the usual three) for employment tax assessments for the first three years beginning after the closing agreement is signed.