IRS Audits Used To Collect Employment Tax Data

Next month, the Internal Revenue Service will begin its Employment Tax National Research Project (“ET NRP”). The last one was performed 25 years ago. The study is needed because business practices regarding employment tax issues may have changed significantly since the last IRS employment tax study.

Examinations comprising the study will be conducted to collect data that will allow the IRS to understand the compliance characteristics of employment tax filers.

The IRS will randomly select 2,000 taxpayers each year for the next three years. The examinations will be comprehensive in scope. Taxpayers will receive notices describing the ET NRP process.

When completed, this information will help the IRS select and audit future employment tax returns with the greatest compliance risk. The results will allow the IRS to gauge more accurately the extent to which businesses properly comply with employment tax law and related reporting requirements.

There are two main goals for the ET NRP:

To determine compliance characteristics so IRS can focus on the most noncompliant employment tax areas, and

To secure statistically valid information for computing the Employment Tax Gap.

Records pertaining to employment tax returns and issues will be subject to review during these examinations. Employers should have all of their records available to expedite these examinations.