Thread: IRS to audit 6,000 firms for unpaid employment taxes

IRS to audit 6,000 firms for unpaid employment taxes

October 2nd, 2009
by Jan Norman, small-business columnist

The Internal Revenue Service says it will audit 6,000 U.S. businesses in search of unpaid employment taxes.

About 2,000 businesses, picked at random, will be audited in each of the next three years, starting in February. The audits originally were to start in October, but have been delayed the IRS says.

The audits will provide information for the first statistical analysis of unpaid employment taxes in 25 years, according to the IRS. It will be looking especially at:

•Misclassifying workers as independent contractors to avoid Social Security, Medicare and other payroll taxes
•Failure to pay taxes on fringe benefits such as employees’ personal use of company vehicles
•Improper payment of taxes for executives
•How S-corporations report officers’ salaries

The IRS has been assuming that employment taxes are underpaid to the tune of $14 billion a year based on the 1984 analysis, but “we think businesses have significantly changed over the last 25 years,â€

Construction companies are notorious for this. Every skilled worked like a mason or carpenter not only is an independent contractor, but often the construction company will classify them as unskilled laborers if they do work on payroll--saves a huge amount in workmen's comp payments for the employer.