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

Los Angeles, CA |

IRS program

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Voluntary-Classification-Settlement-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. 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 information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.


  2. 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
    www.culvercitytaxandbusinesslaw.com
    www.corporateattorney.com
    www.worlclasslawyers.com
    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 only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is philsmithjr@worldclasslawyers.com.


  3. 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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