You won’t become audit bait if you file a Form 941-X to correct a previously filed Form 941, according to Anita Bartels, IRS senior program analyst for employment tax policy. You also won’t become audit bait (or if you do, it will a lot less painful) if you keep good records, file returns on time and respond to IRS notices. What does put you in the audit hot seat?
Bartels answered five key questions at the American Payroll Association’s Annual Congress in May.
Question #1: Are payroll audits different?
Yes, said Bartels. Payroll audits are smaller in scope than corporate audits, and generally encompass these areas:
- Worker classification
- Officer compensation
- Backup withholding.
Question #2: How does an audit work?
If the IRS finds mismatches (e.g., you file 1099 forms but no W-2 forms, or you file W-2 forms but no 941 forms) or your Form 1120S shows distributions to S corp. shareholders but no wages, the IR...(register to read more)