Don't let upcoming IRS audits worry you. (Image courtesy of FreeDigitalPhotos.net)

participate in a special audit by the IRS. This study, conducted by the IRS National Research Program (NRP) will study employment taxes. The purpose of the study is to gather data to calculate possible ‘employment tax gap’ issues and target areas that may be future problems.

Audit specifics
The audits will likely involve a thorough review of the Employer’s Quarterly Tax Returns for the targeted year(s). Other related documents may also be reviewed, possibly forms 1120, 1065 and more.

This will be the largest audit since 1984, and will take place over the next three years. The IRS will examine 2,000 businesses in each of those years. The businesses will be selected at random and will represent a large cross-section of U.S. companies.

There are five main areas that the IRS will focus on: worker classification, reimbursed expenses, officer compensation, fringe benefits and non-filers. It’s a good bet that the auditors may look at other details as they review the five targeted elements.

There is nothing that a company can do to prevent being chosen for the audit, but there are steps that they can take to help make possible audits, future filings and compliance easier.

Review payroll services
Small business owners should review the current payroll practices, focusing on the five areas that the NRP have identified as their specific focus. Review the three most recent years’ employment tax returns, the filing documents and supportive records. A third party payroll service expert can help with this process.

If your company is selected, follow these steps:

• Designate a company representative who is responsible for IRS communications
• Early in the process, retain a payroll service and tax expert
• Request time to respond to IRS requests

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Notice: Arizona businesses who do work for the US Government

A business coalition, including the U.S. Chamber and SHRM, has lost in its effort to have a court overturn the federal regulation requiring federal contractors to start using the E-Verify Program for federal contracts that are entered into or modified after September 8, 2009.  The U.S. District Court for the Southern District of Maryland on August 26, 2009, turned down all arguments raised by the plaintiffs and has opened the door for the rule to be applicable as planned on September 8, 2009. There is no word on whether or not the decision will be appealed.  The USCIS Web site has a federal contractor page as well as a series of Q&As on the rule that explains its provisions and application.

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If you do business in Utah, you need a heads-up on this small article recently published in this daily Salt Lake City newspaper. It isn’t unheard of for this type of situation to arise. Be sure to know who you are working with or even see if they are willing to prove that they are making current tax deposits from time to time. Click here to read more about this article.

To find a Professional Employer Organization (PEO) provider in good standing with both the IRS and NAPEO, check out PEO Services.

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The IRS plans to increase federal employment tax audits this fall and is focusing on four issues: worker classification (the employee versus independent contractor issue); fringe benefits (taxable versus tax-free); officer’s compensation; and reimbursed expenses. The IRS audit program will select employers for audit based on a statistical sample. While the audit program is not focused on fraud, the IRS has also increased the number of investigators looking into employment tax fraud by 249 percent and, according to the IRS, the average sentence imposed on those convicted of tax fraud runs 29 months.     Maryland, the governor has created a task force by Executive Order to enforce the Workplace Fraud Act of 2009 aimed at improper classification of employees as independent contractors. Though the act was aimed at the construction and landscaping industries, the task force is not as limited in its focus and can look further af

Click for assistance with phoenix payroll & arizona payroll tax matters.

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IRS

The current federal minimum which is $6.55 per hour will change to $7.25 per hour.  Prior to 2007 when the federal minimum wage was increased from $5.15 per hour to $5.85 per hour, it had remained the same for ten years.   Wage and Hour Division, www.dol.gov/esa/whd (July 2009).

Commentary

As this is the last scheduled increase in the minimum wage from the 2007 amendment and with the recent job numbers, it is doubtful employers will see another wage increase anytime soon.

All employers should take note of the increase and adjust their wage schedule accordingly.

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U.S. Immigration and Customs Enforcement (ICE) is launching a bold, new audit initiative today by issuing Notices of Inspection (NOIs) to 652 businesses nationwide – which exceeds the total number ICE issued throughout all of last fiscal year. The notices alert business owners that ICE will be inspecting their hiring records to determine whether or not they are complying with employment eligibility verification laws and regulations. Inspections are one of the most powerful tools the federal government has to enforce employment and immigration laws. This new initiative illustrates ICE’s increased focus on holding employers accountable for their hiring practices and efforts to ensure a legal workforce.

“ICE is committed to establishing a meaningful I-9 inspection program to promote compliance with the law. This nationwide effort is a first step in ICE’s long-term strategy to address and deter illegal employment,” said Department of Homeland Security Assistant Secretary for ICE John Morton.

Department of Homeland Security

Employers are required to complete and retain a Form I-9 for each individual they hire for employment in the United States. This form requires employers to review and record the individual’s identity document(s) and determine whether the document(s) reasonably appear to be genuine and related to the individual.

In FY 2008, ICE issued 503 similar notices throughout the year. In April, ICE implemented a new, comprehensive strategy to reduce the demand for illegal employment and protect employment opportunities for the nation’s lawful workforce. Under this strategy, ICE is focusing its resources on the auditing and investigation of employers suspected of cultivating illegal workplaces by knowingly employing illegal workers. The nationwide initiative being launched today is a direct result of this new strategy.

The 652 businesses being presented with NOIs for a Form I-9 audit have been selected for inspection as a result of leads and information obtained through other investigative means. Due to the ongoing, law enforcement sensitive nature of these audits, the names and locations of the businesses will not be released at this time.  If you receive a notice, you should consult with your counsel. However, best practices would require that you: a) respond promptly (or obtain an extension of time to do so), b) do not take any action which could be viewed as tampering with the I-9s or underlying documents, c) initiate an internal review of your practices and an audit, and d) maintain copies of all information and documents provided to DHS.

Note that while you can always take action as to deficient I-9s after you respond to Immigration and Customs Enforcement (ICE), you should date such action as of the date taken and not backdate signatures or alter documents.

For guidance or assistance with hiring practices click here to speak to professionals.

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Did you know that compliance issues with unclaimed property laws can create more than just potential exposure with the state taxing authorities? Failure to comply can also create regulatory problems that could dwarf the state liability exposure. Unclaimed property laws are intended to prevent a business from realizing a windfall if the business holds the property of another party. States have specific rules about how this property must be handled, reported, and transferred to the states. If these rules are not followed completely, the consequences can be significant and, for publicly traded companies, may lead to a Securities & Exchange Commission investigation or other collateral consequences.

Full PDF

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