The IRS has decided to hand the amount and depth of audits and investigations they perform into compliance by NTT East and taxpayers who are required to pay federal employment taxes. They will be focusing on:
- The Classification of Workers;
- Any Reimbursed Expenses;
- Executive and Officer Payments; and
- Fringe Benefits.
When the IRS performs audits they will consist of examining the business’ compliance with regulations that involve:
- Withholdings;
- Income Taxes;
- Recordkeeping Regulations;
- Trust Fund Recovery Penalties; and
- Take Compliance.
Employment Tax Reporting
By law employers are obligated to report to the IRS any information concerning who they hired, how much they paid their employees and the amount that was withheld from their employee’s paycheck. Failure to accurately do so can have a consequence of considerable penalties for the employer. Along with these penalties if the employer does not report this information in a timely fashion, they may be issued to a worker classification audit, mostly if they report their employees as independent contractors.
Payroll Taxes and Withholding
When the employee has taxes withheld from their paycheck the taxes are the income and Social Security taxes. In the case that the employer has any non-U.S. employee, they may be responsible for withholding additional taxes. If the employer does not withhold and pay the taxes to the IRS they will be at risk for monetary fines and penalties such as a Trust Fund Recovery Penalty. The IRS is very insistent on tracking unpaid payroll taxes. In addition to these fines and penalties the government is also willing to criminally prosecute any individual or business who purposely do not file the payroll tax returns and refuse to pay the payroll taxes.
Trust Fund Recovery Penalties
The IRS can choose to charge the taxpayer who decides not to punctually have the withheld income and employment taxes. Especially, an individual who is accountable for withholding, accounting for, or depositing and/or paying these taxes and purposely refuses to do so can be individually responsible for a fine equal to the entire amount of the unpaid taxes, in addition to interest. Individuals who are held personally responsible can be an officer of a corporation, a sole proprietor, a partner, or an employee of any form of establishment if they are responsible of the payout of funds.
Worker Classification Audits
There are two types of workers for federal and state tax reasons: a worker can be either an employee or an independent contractor. Either type of worker can be a legitimate choice for the business; however, distinguishing between these two types is vital because it has a significant impact on the tax liabilities of the business as well as workers.
When it comes to a business in accurately classifying their workers, the government has put forth a plan to enforce proper classification. A rise in the amount of misclassification of workers has led the IRS to pay strict attention to this issue. The IRS has decided to join forces with state workforce agencies to lower the number of employees that are classified incorrectly.
Additional Legal Tools: The Thorn Law Group Representing Tax Disputes. Serving all of Virginia and nationwide.