Should I enroll in the IRS's Voluntary Classification Settlement Program or just switch some contractors to employees?

Asked over 1 year ago - Los Angeles, CA

IRS program

for business who want to change their worker classification. It looks like I'm eligible but since I have not done taxes for the two years, would it be better to just pay the employment taxes? I'm now filing those late taxes and after some research, I think a few workers are not contractors. I don't know if being eligible means I'll get approved for the program so I think I'm risking being audited while my application is processed. Are there any lawyers who are well-experience in this area? I know the fines are very huge if the IRS changes your contractor classification.

Can the state of CA also audit you for that? I will take a CPA referral too, thank you much.

Attorney answers (3)

  1. Evan A Nielsen

    Contributor Level 18


    Lawyers agree

    Answered . Yes, the fines are very heavy and the if there's one area the IRS is absolutely ruthless, it's the employment taxes area. You'll want to treat lightly here and be very careful in the way you submit information. In addition, the settlement program may be an option but it is not always the best option. Our experience in these areas is that a very strategic approach with some initial "confidential and anonymous" contact with the IRS on specific "hypothetical" issues has been the most effective. Let us know if you need assistance.

    Best Regards,

    Evan A. Nielsen is licensed to practice law in California and handles federal tax matters throughout the U.S. The... more
  2. Phillip Monroe Smith

    Contributor Level 18


    Lawyers agree

    Answered . I represent clients in the VCSP program. This program ends June 30, 2013. California does have not a similar program. The progam allows you to pay 10 to 15% of the federal tax if you are approved by the IRS for the program. This a extremely good deal if you qualify, but your time is runnin out.

    Good luck!
    Phillip M. Smith Jr.
    Los Angeles Tax & Business Attorney
    Licensed in the United States Tax Court
    Main: 323-292-4116 ❘ Cell: 562-505-1004

    THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can... more
  3. Bruce Givner

    Contributor Level 19


    Lawyer agrees

    Answered . Both Mr. Smith and Mr. Nielsen have given sage advice. Our experience, however, is that our clients have felt good as a result of going through the program.

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