THERE used to be this dreaded Taxpayer Compliance Measurement Program (TCMP). It was referred to as “audits from hell.” IRS agents audited every item in your tax return, not just red flags. They not only pursued questionable items on your return; they pursued you. The objective was to get statistical data to help with the selection of future audits as well as procedures for conducting future audits. That was for income tax audits. TCMP was replaced by NRP (National Research Program). IRS is now reinventing this type of audit to employment tax returns of business establishments. If you do not run a business entity, you don’t have to worry about it. This is an issue for business establishments - sole proprietorships, corporations, partnerships, and LLCs - especially those with independent contractors.
The audits are being conducted under the National Research Program (NRP).
The goal is to collect data that will help the IRS improve its compliance programs and better use of its resources.
NRP on employment taxes is currently under way.
The selection process was determined based on statistical samples.
The selection process has already begun. So have actual examinations.
The audit phase will last for three years (end of 2009 to 2012).
IRS plans to conduct about 6,000 audits (about 2,000 for each year).
Employment tax audits of businesses commenced last November 2009.
It does not mean that an audited employer filed an incorrect return. You could just be simply unlucky.
IRS is focusing on the following issues:
Worker classification (employee vs. independent contractor),
Fringe benefits,
Officer’s compensation, and
Reimbursed expenses.
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Victor Santos Sy, CPA, MBA, provides professional services in accounting and tax controversy including IRS audit defense and offers in compromise. He also advises clients on choices of entity including corporations for small businesses and LLCs for rentals. Vic worked with SyCip, Gorres, Velayo (SGV - Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation at 704 Mira Monte Place, Pasadena, CA 91101. The firm celebrates its 34th anniversary in 2011. You may email tax questions to Vic at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . You are welcome to visit our website for about 300 tax tips at www.victorsycpa.com.
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