Dixie Contractor 6,000 Audits and More: IRS and State Enforcement Efforts in Employment Tax Compliance August 10, 2012

August 10, 2012

An Introduction to the IRS’s Employment Tax National Research Project

In a 2009 report, the Government Accountability Office (the “GAO”) took the IRS to task regarding its supposed lackluster enforcement efforts in employment tax compliance. The so-called “tax gap” – the gap between taxes owed and those actually paid – was widening at this time, and employment tax issues, such as the misclassification of workers as independent contractors, were believed to play a significant part. Soon after the GAO report’s release, the IRS responded by announcing a “National Research Project” (“NRP”) – the first of its type since 1984 – to address many of the issues outlined in the report.

Referring to the NRP as a “research project” is somewhat disingenuous, however, because in reality it is more like a massive audit initiative. In the NRP, the IRS pledged to audit 6,000 U.S. companies. NRP audits have targeted, and continue to target, a broad cross-section of employers nationwide including corporations and pass-through entities, profitable entities and those in-the-red, and large and small operations. The more important issues included in NRP audits are worker classification, expense reimbursements, executive compensation (Section 409A) compliance, and fringe benefits such as company automobile usage. A sampling of these issues is addressed in this article.

To read the full article from Dixie, please click here.



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