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February 2010IRS Begins Compliance Audit
of 6,000 Employers
of 6,000 Employers
The Internal Revenue Service (IRS) has developed a National Research Program (NRP) on employment taxes and will begin sending questionnaires to 6,000 employers to gather information about their level of compliance. One objective for this audit initiative is to better estimate the percentage of the so-called “tax gap” that is derived from employment tax compliance issues.
As with previous NRP initiatives, the goal is to collect substantial data which will assist the IRS with improving its compliance programs and the utilization of its resources. In conjunction with the NRP, the IRS will conduct detailed employment tax examinations of various size employers across many different industries over a three-year period. The first examinations are expected to begin in late February or early March of this year.
Areas of Focus
While the examinations may look at any reporting aspect of the return, the primary areas of focus are expected to be the following items:
- Worker classification (employee vs. independent contractor)
- Fringe benefits
- Officer's compensation
- Backup withholding
- Form 1099 reporting
If selected, employers should anticipate that the employment tax audits will be extremely detailed and will very likely cover issues beyond the five specified areas of focus. Employers should review their procedures and practices for the above items to ensure that they are in compliance.
If you have any questions, please contact us.
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