Avoid IRS Tax Problems: Correctly Classify Your Employees as IRS Expands Audits to 6,000 Businesses

The IRS announced that it expects to expand its auditing activities by embarking on a 3-year campaign that will audit 6,000 businesses both big and small.

According to the TheStreet.com, the IRS estimates that American companies underpay employer taxes by a whopping $14 billion a year. As the government is strapped for cash, the IRS is stepping up its auditing department to try and cash in on lost tax revenue.

While some companies deliberately mis-classify their workers in order to escape offering health insurance and 401K plans to their employees, some business owners are flat out confused as to how to correctly classify their employees. If you’re unsure of how to distinguish between independent contractors and employees who are on your payroll, you can check out my post for employee classification tax help.

Employers must beware of these IRS audits because if the IRS finds that a misclassification has deprived employees their tax benefits, they can force you as the employer to provide these benefits retroactively.

Despite the current surge of IRS aggression towards the issue, the IRS effort to assess and catch misclassification of employees has been going on for some time. According to the TheStreet.com article, “The IRS last embarked on a comprehensive assessment of misclassification in 1984. At the time, the agency estimated that about 15% of employers misclassified 3.4 million workers. A 2005 government survey determined that 10.3 million U.S. workers were categorized as independent contractors, about 7.4% of the workforce.”

Since there is no clear-defined line when it comes to classifying employees, business owners must be extremely cautious on this issue. There are a few precautionary steps you can take to avoid IRS problems such as early tax planning and using electronic payment methods. Find out more about how employers can prevent IRS tax problems.

If you are an employer and have found yourself in IRS trouble for misclassifying your employees, you are entitled to getting professional tax help from a tax attorney, CPA, or Certified Tax Resolution Specialist. Call the Tax Resolution Services office today at 1-866-477-7762 for a free tax resolution consultation or visit www.taxresolution.com

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One Response to “Avoid IRS Tax Problems: Correctly Classify Your Employees as IRS Expands Audits to 6,000 Businesses”

  1. Business Tax Relief Tips: Correctly Classify Your Employees to Avoid IRS Tax Problems and Penalties | Tax Attorney and Tax Resolution Services: IRS Help Blog Says:

    [...] – misclassification can get you in deep IRS trouble. Employers must be aware of these IRS audits and employee classification assessments because if the IRS finds a misclassification that has deprived employees of their tax benefits [...]

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