IRS gears up for 6,000 audits: What they’re looking for

Thousands more companies are slated for random tax audits in the next three years and they could prove costly — to every business. Here’s what IRS is up to: Randomly selected companies will start seeing audits as soon as this November. IRS’s stated goal is to use the results to choose future targets for employment tax audits. A secondary goal is to better estimate the “tax gap” — taxes owed but not paid, mostly from corporations and self-employed workers.

Although only 6,000 or so companies are expected to be audited, they won’t be the only ones paying for any mistakes that crop up. There’s a lot on the line for every business, of any size. Here’s why:

Auditors will be focused on executive pay issues, misreported/improperly applied fringe benefits and worker classification errors (employee vs. independent contractor, exempt vs. non-exempt, etc.).

Considering that these are three of the tax issues where IRS has left a lot of gray areas, expect a significant number of companies to be deemed not in compliance with the law — despite their best efforts.

Any areas of the tax code that IRS sees a lot of mistakes is a ripe target for tighter rules and regulations down the road.

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