It is common for some employers to treat certain workers as Form 1099 independent contractors. Sometimes, workers in these job classifications are more accurately classified as employees. But it may be difficult for employers to make a correction to the employee classification out of the fear that a change in classification would give rise to a liability for payroll taxes for prior years.

On September 21, 2011, in Ann. 2011-64, the IRS announced a new Voluntary Employee Classification Settlement Program which gives employers the opportunity to correct such classification errors without opening themselves to payment of payroll taxes for prior tax years.

To be eligible, an applicant must...