Internal Revenue Service (IRS) shed light on the department’s future direction and priorities in light of the new funding provided by the IRA22 legislation. Speaking at the annual Congress organized by PayrollOrg, Paul Mamo, the assistant deputy commissioner for Services and Enforcement at the IRS, along with Dan Lauer, the director of SB/SE, examinations, and specialty tax, outlined the IRS’s approach to enforcement and audits in the coming years.
Key Highlights from the Address:
- Technology and Payroll Compliance: The IRS is not just focusing on bolstering its technology infrastructure but also emphasizes payroll compliance.
- Employee Retention Credit Fraud Initiative: The department is taking measures to counter fraud and ensure businesses are genuinely entitled to claim the credits they seek.
- S Corp Audits: One of the primary areas of focus will be on S corporations. Auditors will be zeroing in on S corp owners to determine if they are drawing a reasonable FICA-taxable salary.
- Large Case Audits: This encompasses substantial businesses, ensuring they are adhering to the set tax norms and aren’t evading their due amounts.
- Mid-sized Privately Owned Corporations: Lauer pointed out that his audit teams will be particularly vigilant about issues related to fringe benefits and discriminatory benefit plans when reviewing mid-sized private corporations.
- Worker Classification: The IRS will be rigorously conducting worker classification audits in specific industries that are yet to be named. Furthermore, the emphasis will also be laid on Section 530 relief.
A Caution on Compensation:
Both Mamo and Lauer highlighted the steep penalties that come with not ensuring a reasonable compensation for S-Corp owners. Practitioners are also not exempt from these penalties. The underlying message was clear: shortcuts in calculating reasonable compensation can prove costly. It is imperative for both practitioners and S-Corp owners to be diligent and ensure compliance in this area.
In conclusion, as the IRS gears up to utilize the funding from the IRA22 legislation, businesses of all sizes must stay informed and prepared. Ensuring compliance, particularly around compensation, can save businesses from hefty penalties and legal hassles.
