Employment Taxes-Beware-IRS Is On The Prowl
The IRS has commenced its first Employment Tax Research Project in more than 25 years and has two main goals. The first is to secure statistically valid information computing the difference between the taxes collected and the taxes owed (approximately $200 billion) to the U.S. Government; and the second is to determine the most “noncompliant” employment tax areas.
Do you get the impression the government needs money? Well, the IRS is looking into the extent to which businesses comply with employment law taxes and withholding requirements. Over, and within, the next three years the feds will select 2000 employers for what it describes as a very close look that will initially focus on tax returns from 2007 and 2008.
It is likely that employers who are unlucky enough to be selected will be subject to lengthy, inconvenient and expensive audits. And, any employers that are audited and that had the misfortune to misclassify employees as independent contractors or failed properly to withhold, will likely be subject to significant tax bills. I have several clients who are currently facing audits from the U.S. Department of Labor and I can tell you they are focusing on the issue of independent contractors and their misclassification. Why, because it is a fact that most employers do not understand the true definition of an independent contractor. One or two pieces of paper where both parties agree that the individual is an independent contractor will not get the job done.
If you receive a notice from the IRS, or the U.S. Department of Labor, that your business has been selected for an audit, please contact us immediately. If you want a current agreement reviewed, or you have a question about the status of an individual, give us a call.