June 16, 2011 – The IRS’s attempt to close the “tax gap”, the difference between taxes owed and taxes actually paid to the IRS, is officially underway.
The Employment Tax National Research Project is auditing 6,000 U.S. employers through 2012 to try and claim some of the $60 billion of uncollected employment taxes the IRS estimates make up the $345 billion tax gap.
The project will examine employee misclassification, fringe benefits, expense reimbursement and owner compensation to determine where tax liabilities might have been overlooked and under-reported. In addition to collecting unreported taxes, the IRS may also collect penalties and interest.
Even if you’re not one of the chosen few to participate in this audit, you may want to evaluate how your company treats these topics.
Areas of Mandatory Compliance:
Worker Misclassification
Treating employees as independent contractors as a recessionary cost-cutting measure may backfire on some employers. An audit which proves workers were not independent contractors but actually employees and subject to employer control, may make employers liable for unreported unemployment, Social Security and Medicare taxes, and, possibly, overtime back-pay. Additional penalties and interest can also result from this worker misclassification.
No Misclassification! 