Get ready for the Employment Tax Audit Initiative

The Employment Tax Audit Initiative (the Initiative), in which the IRS will audit 2,000 U.S. companies annually, commenced in February 2010.

The Initiative was originally announced in September 2009 and will provide data for the IRS's National Research Program (NRP) study of employment tax compliance.

This will mark the first such study conducted by the IRS since 1984. The IRS is expected to focus during the audits initiated pursuant to the Initiative on the following five employment tax issues:

1. Worker classification (employee vs. independent contractor). 2. Fringe benefits. 3. Officer's compensation. 4. Reimbursed expenses. 5. Non-filers. The Initiative is intended to help reduce the size of the tax gap—i.e., the difference between the tax the IRS estimates is due and the amount actually paid by taxpayers.