What the IRS Is Looking For
First, you should know what the IRS is looking for when they conduct an employment tax audit. Essentially, they are examining your employment tax records for violations such as:
- Failure to properly document workers, such as failure to obtain a valid Social Security Number or ID before hiring. This is of particular interest to the IRS in cases of foreign workers.
- Failure to properly classify employees, such as classifying an employee as a contractor or as exempt instead of non-exempt
- Failure to accurately report reimbursed expenses
- Not paying or reporting employment tax
- Not collecting and remitting payroll tax
- Not reporting incentive programs and fringe benefits as taxable income
- Not properly taxing or reporting officer compensation
Having the IRS scrutinize this area of your business can be concerning, but there are a few things you can do to ensure your audit goes as smoothly as possible.
Gather Your Documentation
Identify the year or years in question that the IRS wants to audit. Collect as many employment tax records as possible from that time period. Ideally, you want to be able to show that you did collect and remit payroll tax, that you did accurately report reimbursed expenses, and that you did obtain proper documentation from workers before you hired them. Tribute Tax Defense can help you gather your records and organize them in preparation for the audit, which can give you a great deal of peace of mind when the audit begins.
Find Out What Kind of Audit It Is
Most people imagine IRS audits are in person (a field audit), but sometimes they aren’t. In cases of audits for individual taxes, these may be conducted by mail (a correspondence audit). For businesses, there’s a higher chance that your audit will be in person, however, it may still be a correspondence audit or even at the IRS office (a desk audit). Determine what kind of audit you will be undergoing and prepare copies of your documents for it. If a desk or field audit, you may want to invest in folders to keep everything organized. A correspondence audit will require large envelopes and lots of postage.
Make Sure You Have Someone In Your Corner
Going through any kind of IRS tax audit can be a disconcerting experience for anyone. If you’re a business owner though, there’s a lot more at stake. If you are found to be in violation of any tax laws, your business assets may be seized and you may be fined a substantial amount — with interest.
At Tribute Tax Defense, we can help. Let us guide you through the employment tax audit process and help you come out the other side with your business intact and better for it. Call now for a consultation at (713) 497-1841.