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IRS Plans 6,000 Employment Tax Audits

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September 21, 2009

The IRS reportedly wants to find out how closely companies are complying with requirements for paying employment taxes by doing audits of about 6,000 companies.

A major concern will be how well companies are classifying their employees and independent contractors, according to Bloomberg.com. The Government Accountability Office released a report in August indicating that employee/independent contractor misclassifications remain a problem, although the full extent is unknown. It recommends better coordination between state and federal agencies and between the Labor Department and the IRS.

The IRS, in its upcoming audits, will focus not only on employee misclassifications, but also on how well companies report executive perks such as use of company cars, personal use of company-owned vacation property, and salaries at S corporations, according to Bloomberg. The new audits could be an uncomfortable experience for the accounting departments that will be facing them. Major companies like FedEx are already in hot water over their classification of home delivery truck drivers as independent contractors.

An IRS audit of the company’s 2002 taxes is going to cost FedEx $14 million in taxes and penalties if the company doesn’t win its appeal, and the IRS is still doing audits of the delivery giant's 2004 through 2008 taxes. Companies facing similar audits might need to make sure they’re prepared for heavy penalties if the IRS decides they haven’t been paying their fair share of employment taxes.

Comments (2)
Something that is essential to do is make sure all your information is accurate on your tax return, because if it isn't, and is chronically so, be sure to expect an IRS audit. No one wants one, period; and you can wind up facing charges of defrauding the IRS, and the penalties that you can face will send you running for
Posted by lestat_B | Tuesday, March 02 2010 at 2:56AM ET
I was just reading about how the IRS was going to continue these audits for the first time since the 1984 analysis. This has lead to two main points of action. 1. Companies need to ensure their payroll taxes are up to date and correct. 2. Companies need to prepare themselves through internal audits to ensure they are ready.
www.blogs.vbpoutsourcing.com
Posted by vbpoutsourcing | Tuesday, September 22 2009 at 4:45PM ET
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