Starting this month, the IRS has launched a major audit initiative focusing on the underpayment of employment taxes by employers. As part of its Employment Tax National Research Project (NRP), the IRS will randomly select 2,000 employers to audit each year for the next three years.
Those employers will be subjected to comprehensive audits of their employment tax practices.
The IRS began the NRP in 2000 to measure the so-called “tax gap” between taxes voluntarily reported by taxpayers and the amounts actually due to the IRS. Past NRP projects have focused on audits of randomly selected individuals and S corporations.
The new NRP will focus on four areas that the IRS believes currently are improperly reported by employers:
• Worker classification (employee vs. independent contractor);
• Fringe benefits;
• Executive compensation; and
• Reimbursed expenses.
