IRS random payroll audits

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As part of a National Research Project, the IRS’s Employment Tax Policy Division will conduct 2,000 employment-tax audits each year for the next three years.

The examinations will include 2008 Forms 941 – the Employer’s Quarterly Federal Tax Return – and will focus on the following issues:

(1) worker classification (employee vs. independent contractor),
(2) fringe benefits,
(3) officer’s compensation, and
(4) review of 1099s with either no taxpayer identification number, or taxpayer number and name mismatches.

Small- and large-employers and self-employed taxpayers will be selected for audit.

Many of the taxpayers have already been notified by the IRS, said Greg Gandy, tax director at BiggsKofford, a local accounting firm.

But less than one-third of the audits scheduled for this year are under way.