Houston C-Corp, 34 workers misclassified as 1099 for 3 years. VCSP filed. Penalty reduced from $380K to $42K. IRS notice closed.
01The Situation
This Houston construction C-Corp had classified 34 field workers as 1099 contractors for 3 years. The standard IRS penalty calculation came to $380,000. The VCSP offered a dramatically better outcome, but only if filed before the audit formally commenced. He had 60 days.
02What We Did
We completed a worker-by-worker classification analysis. All 34 met the W-2 standard. VCSP filed in 45 days. Simultaneously rebuilt 3 years of payroll records and an amended job costing system allocating labor by project for the first time. IRS accepted and closed the notice.
This result came from our books cleanup services for construction companies. See more client results.
Breakdown
| Worker Category | Count | Prior Class. | Correct Class. | Annual Payroll | Status |
|---|---|---|---|---|---|
| Site Supervisors | 8 | 1099 | W-2 | $420K | |
| Equipment Operators | 12 | 1099 | W-2 | $580K | |
| General Laborers | 14 | 1099 | W-2 | $490K | |
| Office Admin | 6 | W-2 correct | W-2 | $180K | |
| Verified Subcontractors | 11 | 1099 correct | 1099 | $320K |
The corrected job costing revealed two projects that looked profitable were actually break-even once labor was properly allocated. That changed how the owner bids every job.
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