The IRS is launching a three-year auditing project that will examine about 6,000 U.S. companies for compliance with employment tax obligations. The project is the first of its kind in 25 years, and its primary objective is to collect data to identify areas of noncompliance across all industry sizes and sectors, including nonprofits and governmental entities.

Among the issues the audits will look at:

• Classification of workers as employees or independent contractors, including executives rehired as consultants, dual status employees, and employee leasing arrangements.
• Fringe benefits, including expense reimbursement arrangements and noncash benefits.
• Executive compensation and fringe benefits, executive retirement contracts, golden parachutes, and stock options.

The project will target 2,000 employers each year, with the first audit letters scheduled to go out this month or next.

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