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2010 IRS Employment Tax Crackdown

By Sherrard Lee 'Butch' Hayes and Julie Chen

In the summer of 2009, the Internal Revenue Service (IRS) unveiled its “Employment Tax National Research Project,” an initiative to review and audit comprehensively the employment tax practices of 6,000 randomly selected businesses across the country from 2010 to 2012. It is the first time since the 1980s that the IRS has implemented an employment tax audit of this magnitude. Accordingly, any business selected for this audit should expect an intense and detailed examination into their tax records, compliance, and reporting practices.

The stated purpose of the IRS audit is to collect data that will help the agency better understand the areas in which businesses most frequently fail to comply with employment tax laws and related reporting requirements. The IRS plans to use these audits to secure statistically valid information for computing the “Employment Tax Gap” (the difference between the amount of tax owed by taxpayers and the amount actually paid voluntarily and on time by taxpayers ' last estimated to be approximately $350 billion), and to determine compliance characteristics so that it can address the most noncompliant employment tax areas going forward.

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