IRS Focusing Efforts on Certain Employment Tax Areas
John
Tuzynski, IRS Chief, Employment Tax Operations, told attendees at APA's
26th Annual Congress that the IRS is focusing its efforts on the
following employment tax initiatives: (1) worker classification, (2)
tip reporting, (3) officer's compensation, (4) fringe benefits, and (5)
backup withholding.
Worker classification. Approximately
30% of IRS audits focus on the employee vs. independent contractor
issue. The IRS is receiving twice as many Forms SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, as
it did in the past. This form is primarily filed by workers who are
currently being treated as independent contractors, but who believe
that they should be treated as employees.
Tip reporting. The
IRS is looking for voluntary compliance in this area, particularly from
small businesses. Tuzynski believes some employers in the food and
beverage industry may not be aware of the Attributed Tip Income Program
(ATIP). ATIP is a voluntary tip reporting program providing benefits to
employers and employees similar to other tip reporting agreements, but
it doesn't require one-on-one meetings with the IRS to determine tip
rates or eligibility. Employers and employees in ATIP will not be
subject to a new IRS examination during their time in the program.
Officer's compensation. There
are many S corporations with significant distributable income that
report very little officer compensation, even though the officer
provided key services to the corporation. These corporations may not be
paying their fair share of employment taxes.
Fringe benefits. The IRS continues to target improper employee tool and equipment expense reimbursement plans.
Backup withholding. The
IRS does not currently follow up on notices that it sends to employers
asking them to begin backup withholding on workers with mismatches
between their name and taxpayer identification number. Tuzynski said
that the IRS will soon have a new initiative in this area.
Condensed from © 2008 Thomson/RIA.
