IRS Launches Employment Tax Audits!
In November 2009, the IRS kicked off a new National Research Program Initiative, known simply as “the Initiative”. It involves the detailed "audit of employment taxes" for 6,000 randomly selected businesses over the next three years. The intent of the Initiative is two-fold:
The IRS has identified specific areas to focus their auditing efforts under the Initiative, including:
- Worker Classification: This involves an examination to determine whether a worker is properly classified as an employee or independent contractor for tax purposes. The determination is based several aspects of the relationship between the employer and the person performing the work.
- Employee Fringe Benefits: A fringe benefit is a form of payment for the performance of services. Fringe benefits include such items as insurance coverage, use of a company car, free meals or child care. They are provided by employers tax-free to employees but not to independent contractors.
- Reimbursed Business Expenses: These are an employee’s out-of-pocket expenses that are reimbursed to him by the employer. Typical reimbursed business expenses include taking a client to lunch or purchasing office supplies. To qualify, a worker must have paid or incurred the expenses while performing services as an employee.
Make sure your company is in compliance! If not, speak with an experienced Tax Attorney that can help you get into compliance or if the IRS has already contacted you, hire an attorney today to help you through the process!