IRS to Audit 5,000 Random Employers Beginning Next Month

If you’ve been underpaying and/or under-reporting your company’s payroll taxes, the IRS wants to know–and collect what’s due.

With the annual "tax gap" between what’s owed and what’s paid estimated at $290 billion, the Internal Revenue Service is siccing its agents on 5,000 randomly selected employers beginning in November 2009 as much for a learning lesson as a collections effort.

The IRS is publicly calling this a National Research Program (NRP) to downplay the collections aspect, but the research itself will be employed to create more functional compliance and collection programs.

The NRP will focus on four areas: worker classification, fringe benefits, reimbursed expenses and owner compensation. The worker classification test will be for independent contractors to determine if a company is improperly classifying employees as independent contractors to save fringe compensation and to shift the tax burden onto the misclassified contractor.

In September 2009, the U.S. Government Accountability Office (GAO) released a report urging the Department of Labor (DOL) and IRS to increase “their efforts to probe the improper classification of workers” as independent contractors, educate employers and use penalties to deter misclassification. The GAO was particularly critical of the DOL’s Wage and Hour Division for its very limited enforcement activity.

If your company is targeted, expect an IRS audit of your W2s and other wage records as well.

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

* Copy this password:

* Type or paste password here:

230 Spam Comments Blocked so far by Spam Free Wordpress

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> <font color="" face="" size=""> <span style="">

Spam protection by WP Captcha-Free

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> <font color="" face="" size=""> <span style="">

Comments (required)*

Spam protection by WP Captcha-Free