Certain things can land a business in hot water with the Internal Revenue Service. One is being accused of not having acted properly regarding payroll taxes.
Disputes with the IRS over payroll taxes can have big implications for a company. These disputes can have numerous complex aspects. How these aspects are dealt with can impact how well a business owner is able to protect their company’s interests over the course of the dispute. Tax lawyers can assist companies accused of payroll-tax-related reporting and withholding missteps with addressing the complicated legal matters that can come out of such accusations.
In a recent report, the Treasury Inspector General for Tax Administration leveled some criticisms towards the IRS when it comes to the agency’s conduct regarding one of the programs aimed at detecting and addressing underreporting of employee wages and withholding by businesses.
This program is the Combined Annual Wage Reporting Program. This program compares the information employers supply to the IRS with the info they supply to the Social Security Administration. The aim of this comparison is to detect if there are discrepancies between the wage/withholding information businesses report to the two agencies. Among the thing discrepancies could potentially point to are companies underreporting wages and underpaying when it comes to payroll taxes.
In its report, TIGTA made multiple criticisms of how the IRS handles cases in which discrepancies are detected. One thing that the report noted is that many discrepancy cases go unaddressed. According to the report, only around 17 percent of the discrepancy cases detected for 2013 tax year that the report looked at have been worked on by the IRS. This left well over 100,000 cases outside of IRS attention. The report also argued that, under current IRS selection processes for what discrepancy cases to work on, many discrepancy cases with a high likelihood of yielding high tax assessments can end up not being worked on.
TIGTA made multiple suggestions to the IRS on how to improve its handling of discrepancy cases. The IRS agreed to most of them.
One wonders what effects the changes the IRS makes in the wake of the report and the suggestions it contained will have on the IRS’ overall enforcement efforts related to payroll taxes and the companies that end up being the targets of such efforts.