IRS to Randomly Audit 6,000 Employers
Beginning in February, the Internal Revenue Service (IRS) will begin to randomly audit an estimated 6,000 U.S. companies. As one of the agency's largest campaigns since 1984, the results of the audits are expected to generate revenues for the agency as well as provide statistical data on employer tax compliance.
The first round of audits, which is expected to begin in February 2010, will affect 2,000 companies selected randomly, with another 2,000 companies selected for both 2011 and 2012 audits. Companies selected for review will vary in size and business structure, and will include both for-profit and non-profit organizations. The audits will primarily focus on five critical areas: worker classification (e.g. employee vs. independent contractor or exempt vs. non-exempt), fringe benefits, reimbursed expenses, owner/officer compensation and non-filers.
The IRS will use 200-300 of its most experienced agents to conduct line-by-line reviews of each company's employment tax returns, income tax returns and forms issued to workers, such as forms W-2 and 1099. While the auditors will focus primarily on calendar years 2007 and 2008, the audits may be expanded to cover additional years.
To prepare, companies are urged to review current payroll practices as well as their three most recent years' employment tax returns.
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