Employment Tax Audit Initiative

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As part of its National Research Program the I.R.S. has announced details of its employment tax audit initiative (ETAI). The ETAI is a nationwide three year program targeting at least 6’000 businesses beginning this month. The first of those audited will receive letters during the end of February and March 2010.

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Employment Tax Audit Initiative

  1. 1. MCMILLAN CONSULTING February 2010 Employment Tax Audit Initiative Tax Clients, As part of its National Research Program the I.R.S. has announced details of its employment tax audit initiative (ETAI). The ETAI is a nationwide three year program targeting at least 6’000 businesses beginning this month. The first of those audited will receive letters during the end of February and March 2010. The audit’s focus is to identify and collect employment taxes from companies they feel are misclassifying their employees as subcontractors. There was a similar audit performed about 25 years ago. This audit resulted in many reclassifications and huge bills for large companies. The I.R.S. has stated that while they’ll audit large companies the vast majority will be small businesses. The prior audit focused just on reclassification. In addition to reclassifications the current audit will also target compensation, benefits, withholdings and more. We have learned that several states are preparing to create similar programs. State tax authorities will select companies which will increase your chances of being audited. The state and federal entities are going to cooperate and share information. Lastly, if your company is found to have employment tax issues, it may trigger a more traditional audit from the I.R.S. and/or your state authority. McMillan Consulting can audit your company and asses the classification of your subcontractors.10 N. Calvert St, Suite 224, Balto, MD 21202410-775-6226p | 877-384-5542finfo@macadvises.com | http://macadvises.com

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