Detailed Federal Employment Tax Audits to Begin Soon
Mary Gorman, IRS Assistant Division Counsel (Prefiling), indicated on a payroll industry conference call that the IRS National Research Program (NRP) study on employment taxes will begin at the end of the month. The IRS will randomly select 2,000 taxpayers for employment tax examinations each year for the next three years. The examinations will be comprehensive in scope. Records pertaining to employment tax returns and issues will be subject to review during the examinations. Although the IRS may look at any line on an employment tax return during the audits, the examinations will primarily focus on the following issues: (1) worker classification (employee vs. independent contractor), (2) fringe benefits, (3) officer's compensation, and (4) review of 1099s with either no taxpayer identification number (TIN), or TIN/name mismatches. The IRS is currently training its agents on the procedures to follow during the audits. The bulk of the exams will be conducted by the IRS Small Business/Self-Employed Division. The IRS is hoping that the study will help it improve its examination techniques and close the employment tax gap (i.e., the difference between what is paid in taxes and what should be paid). It's the first IRS study on employment taxes in 25 years. The IRS will begin notifying taxpayers about the examinations on February 16th.
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Call Certified Payroll Professional Velina Beasley at 912-537-3017 for more information on the upcoming federal employment tax audits. Velina can answer your questions regarding worker classification (employee vs. independent contractor), fringe benefits, officer's compensation and help keep your business in compliance with federal regulations.
