Beginning in February, 6,000 random (unlucky) companies will start getting the IRS version of Happy New Year’s wishes: a notice they’re going to be audited over employment taxes.
While agents will be looking for an array of violations, they’re really targeting Form 1099 independent contractors who should be classified as regular employees.
And firms who are caught violating this are likely to receive hefty back tax bills and sizable fines.
IRS agents are also hoping to sniff out tax rule violations for exec pay and fringe benefits.
The random nature of these audits includes all companies — regular C corporations, S corps, partnerships, limited liability companies (LLCs), etc. — across all industry types.
According to the IRS’s chief of employment tax operations in the Small Business/Self-Employed Division, John Tuzynski, the audits will be conducted based on Form 941 and then they will work backward.
In addition to sterling documentation, doing an internal audit in the targeted areas may help ensure A/P and Payroll are thoroughly prepared should the IRS come knocking.