Accepted Answer

Hello,

Thank you for requesting me for your question. Did you fill out a Form SS-8? This form tells the IRS your position and the IRS must send it to the business if a contractor files one. I'm assuming yes. If not, you should file one ASAP. If you disagree with the IRS determination and you have additional information concerning the work relationship that you believe was not previously considered, you may request that the determining office reconsider the determination.

The Pathologist is probably amending his taxes and this will defintely cause the IRS to eventually initiate charging you for your LLC's share plus penalties/interest. It is better to file your own amended payroll tax forms as soon as possible in order to limit the penalty and interest charges from accruing.

The IRS may consider removing any late deposit and late payment penalties if you believe you had a reasonable cause for treating the employee as a contractor. You can send a penalty abatement request letter to them after you receive notice of penalties and interest. If it is not determined to be willful neglect, they may abate the penalties.

There is also a relief provision under IRC §530. If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. See Publication 1976, Section 530 Employment Tax Relief Requirements (PDF) for more information.

Hope this helps!
Best regards,

Expert:	JK_CPA
Pos. Feedback:	100.0 %
Accepts:
Answered:	10/22/2009

Certified Public Accountant (CPA)

with 5 years accounting experience and 18 years tax experience.