Feds Plan 6,000 Biz Audits: What They're Looking For

November 18, 2009 by Jim Giuliano - Special Report

The Internal Revenue Service is calling it “the National Research Program on employment tax compliance.” What it amounts to is a far-reaching audit program to dig up business-tax revenues.

Here are the two main areas that are going under the IRS spotlight:

• Improper worker classification. The agency is mainly concerned with workers classified as independent contractors because the classification affects the revenue state governments receive to pay for unemployment benefits.
  
• So-called nonconforming benefits. Those are benefits that could be considered wages subject to employment taxes. The typical targets: personal use of company vehicles, employee discounts, employer-provided housing and meals, accident and health benefits, educational assistance and stock-based compensation. Reimbursed expenses, in order to be tax-free and deductible, must generally be reasonable, have a business connection, include reasonable accounting for the expenses, and all excess reimbursement should be repaid within a reasonable time.
  

IRS has announced that it will be looking at mainly tax records for 2007 and 2008, but that doesn’t mean other years are exempt from examination. The announcement about the program was first made by the agency’s Anita Bartels at the Annual Congress of the American Payroll Association.