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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