Understanding the Facts: Taking steps to prepare for, and lessen the impact of, employment tax audits

UNDERSTANDING THE FACTS:Employment Tax  Withholding and reporting employment taxes require accuracy. Sometimes mistakes are made in withholding or reporting the correct amount of wages, tips, and taxes to the Internal Revenue Service. These inaccuracies may be discovered during an employment tax audit. An employment tax audit takes one of two forms: a "compliance check" (a perusal of a company's federal employment tax forms and a brief interview centering on the factors the service deems important) or a full audit (an extensive and detailed examination of corporate books and records). When a company receives the IRS notification about the audit, it should, in turn, notify its CPA firm, which must obtain a clear understanding of the facts and issues relevant to the client's situation. Although such examinations are time-consuming, detailed and costly, taxpayers (and their accountants) can take steps to prepare for, and lessen the impact of, these audits.