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Detailed IRS Employment Tax Examinations Scheduled to Begin
June 14, 2010
The IRS National Research Program (NRP) study on employment taxes is scheduled to begin this spring. The IRS will randomly select 2,000 taxpayers for comprehensive employment tax examinations each year for the next three years. Following are some tips on how to prepare forthis type of audit.
Before the first meeting.
Employers should establish an internal team before the IRS meeting. The team should consist of payroll, accounts payable, accounting, human resources, internal auditing, general counsel, and outside tax professionals. A person (point person) should be appointed by the internal team to manage the examination and supervise the input from employees.
The point person should assemble and regulate the flow of information between the IRS and the employer. The point person should review all information before it is turned over to the IRS and be present during tours and interviews of employees. This type of setup will increase the likelihood that the information provided to the IRS is organized, complete, and focused. An important caution is that employers should not to try to restrict or hide information.
Information requests.
The IRS requests information that it would like to look at during tax examinations on Form 4564, Information Document Request. The requests should be given to the point person. Employers are required to provide the IRS with all the information that the Service islegally allowed to request. However, employers are not required to provide any information that is not specifically requested by the IRS.
Problems with the IRS agent.
It is perfectly acceptable to have unresolved audit issues with the auditors. And it’s important to know that an audit can be stopped if an employer feels that an agent is not conducting himself/ herself professionally. The matter should then be discussed with the auditor’s supervisor.
Appeals.
Unresolved tax examination issues that are not part of the closing agreement may be appealed to the IRS Appeals Office. Open audit issues that cannot be resolved with the Appeals Office may be litigated through a formal trial. This option should be chosen only as a last resort because of the time and expense involved in the litigation of tax disputes.
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