Companies Beware. The IRS is Coming!

The IRS may soon be knocking on the door of your company. The IRS reportedly wants to find out how closely companies are complying with requirements for paying employment taxes by doing audits of about 6,000 companies across the country. Do you have any concerns?

A major concern will be how well companies are classifying both their employees and independent contractors, according to The Government Accountability Office released a report in August indicating that employee/independent contractor misclassifications remain a problem, although the full extent is unknown and the reason the IRS wants to scrutinize this area more closely. It recommends better coordination between state and federal agencies and between the Labor Department and the IRS.

The IRS, in its upcoming audits, will focus not only on employee misclassifications, but also on how well companies report executive perks. According to the Bloomberg report, the IRS will also be looking into:

  • personal use of company cars
  • personal use of company-owned vacation property
  • salaries at S corporations

John Tuzynski, chief of employment tax operations at the IRS, stated, “We think businesses have significantly changed over the last 25 years. This will help us find out where there are real issues we have to address.”

The audits are expected to begin in February and companies will be randomly chosen. Most of the audits will be face-to-face, Tuzynski said, although the IRS will gather information from internal sources and the Internet. If you have concerns, contact Anders or your tax advisor.

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