IRS TO BEGIN EMPLOYMENT TAX AUDITS

The IRS National Research Program will conduct a comprehensive study on employment taxes beginning in February 2010, the first of its kind in 25 years. Originally scheduled for November 2009, the IRS delayed launching the program for a few months.

The objectives of the program are twofold: to determine compliance characteristics to assist the IRS in focusing on certain employment tax issues; and to gather data to calculate the employment tax gap. The IRS believes that the project is necessary due to significant changes in business practices relating to employment taxes since the last study in the 1980s.

Audit Details

Under the program, approximately 6,000 employer-taxpayers are to be randomly selected from a large cross section of U.S. companies for employment tax audits — 2,000 each year for the next three years. The audits will be comprehensive in scope and will likely apply to for-profit and not-for-profit employers alike.

In conducting the examinations, the five main areas of concern to the IRS will likely be worker classification, reimbursed expenses, officer compensation, fringe benefits, and non-filers. Naturally, the IRS’ examination will likely go beyond these targeted issues.

If You’re Selected for Audit

Businesses selected for audit should be prepared to provide all pertinent records relating to issues on employment tax returns in an effort to expedite the examination’s completion. Taxpayers selected for audit will receive a notice describing the National Research Program study and the audit process.

The IRS reminds employers that selection for audit doesn’t necessarily mean an employment tax return has been incorrectly filed or that any additional taxes will be due as a result of the examination.