Detailed federal employment tax audits to begin in November
Small business owners may find themselves involved in a new IRS "program." In this case, "program" is another word for "detailed audit" on employment tax issues.
An IRS official has stated that the goal of the IRS National Research Program (NRP) is to collect data that will help IRS to improve its compliance programs and better use its resources. A new NRP on employment taxes is currently under development. During the project, IRS will conduct detailed employment tax examinations of certain taxpayers. Anita Bartels, Senior Program Analyst, IRS Small Business/Self-Employed (SBSE) Employment Tax Operations, told attendees at the American Payroll Association's (APA) 27th Annual Congress that the program will begin in November.
The selection process for an NRP audit is determined based on a statistical sample. It doesn't necessarily mean that an employer has incorrectly filed a return.
Bartels indicated that the selection process has already begun. The program will last for three years. Bartels believes that there could easily be 2,000 tax examinations during each of the three years. Although IRS may look at any line on an employment tax return during the examination, it will primarily focus on the following issues:
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worker classification (employee vs. independent contractor);
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fringe benefits;
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officer's compensation; and
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reimbursed expenses.
About the Writer
Desmond G. Sheridan is a partner in the Greensboro law firm of Isaacson Isaacson Sheridan & Fountain, LLP and is a certified public accountant. His practice areas are business transactions, tax, corporations, limited liability companies, commercial real estate and estate planning. Sheridan has served on the Board of Directors of the North Carolina Association of Certified Public Accountants and has been recognized as a North Carolina "Super Lawyer" and a member of the "Legal Elite" by Business North Carolina. He has given numerous continuing education presentations to CPAs and attorneys.
