We are comprised of Tax Attorneys, Certified Public Accountants, and former IRS agents and managers who worked out of the local South Florida tax offices for over 60 years.
Our firm have conducted IRS payroll tax audit when working for the Internal Revenue Service. We know all the tax policies, tax systems, and tax strategies that will be employed by the Internal Revenue Service during an IRS payroll tax audit.
We are tax experts in dealing with IRS payroll tax matter audits because of our inside information that we have on the Internal Revenue Service during our years of work experience in the local South Florida IRS offices.
IRS payroll audit matters are serious to the Internal Revenue Service because this is not a tax but actually a trust fund, that is, money that was held in trust to be turned over to the US government.
The IRS can go so far as assessing the persons individually responsible for the nonpayment of the payroll tax and individually assessing, therefore going beyond the corporate or business vale to assess and collect taxes from all those responsible for nonpayment. This process is called the assessment of the trust fund tax and is found under code section 6672.
The Internal Revenue Service has special agents to work IRS payroll tax audits. They are trained specifically for the sole purpose of IRS payroll tax audits.
If you have received an IRS notice her letter of a potential IRS payroll tax audit contact us today for free initial consultation and review of your case and hear the truth about your situation.
We are A+ rated by the Better Business Bureau and have been in private practice right here in South Florida since 1982 our firm has a total of 206 years of professional tax experience.
The IRS has a complicated set of guidelines for determining whether a worker should be treated as an employee or independent contractor for payroll tax purposes.
Revenue Ruling 87-41: The Twenty Factors
To help determine whether a worker is an employee under the common law rules, the IRS identified 20 factors that may indicate whether the employer can exercise enough control to establish an employer-employee relationship. These factors, set forth in Revenue Ruling 87-41, were based on the circumstances that the courts identified and relied upon to decide whether an employment relationship existed.
Important Note – Not all the factors must be present to find an employee/employment relationship, but the factors are guides to use to assess the likelihood as to whether an individual is an employee or an independent contractor.
(1) Instructions.
An employee must comply with instructions about when, where and how to work. The control factor is present if the employer has the right to require compliance with the instructions.
(2) Training.
An employee receives on-going training from, or at the direction of, the employer.
Independent contractors use their own methods and receive no training from the purchasers of their services.
(3) Integration.
An employee’s services are integrated into the business operations because the services are important to the business. This shows that the worker is subject to direction and control of the employer.
(4) Services rendered personally.
If the services must be rendered personally, presumably the employer is interested in the methods used to accomplish the work as well as the end results. An employee often does not have the ability to assign their work to other employees, an independent contractor may assign the work to others.
(5) Hiring, supervising and paying assistants.
If an employer hires, supervises and pays assistants, the worker is generally categorized as an employee. An independent contractor hires, supervises and pays assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the result.
(6) Continuing relationship.
A continuing relationship between the worker and the employer indicates that an employer-employee relationship exists. The IRS has found that a continuing relationship may exist where work is performed at frequently recurring intervals, even if the intervals are irregular.
(7) Set hours of work.
A worker who has set hours of work established by an employer is generally an employee. An independent contractor sets his/her own schedule.
(8) Full time required.
An employee normally works full time for an employer. An independent contractor is free to work when and for whom he or she chooses.
(9) Work done on premises.
Work performed on the premises of the employer for whom the services are performed suggests employer control, and therefore, the worker may be an employee. Independent Contractor may perform the work wherever they desire as long as the contract requirements are performed.
(10) Order or sequence set.
A worker who must perform services in the order or sequence set by an employer is generally an employee. Independent Contractor performs the work in whatever order or sequence they may desire.
(11) Oral or written reports.
A requirement that the worker submit regular or written reports to the employer indicates a degree of control by the employer.
(12) Payments by hour, week or month.
Payments by the hour, week or month generally point to an employer-employee relationship.
(13) Payment of expenses.
If the employer ordinarily pays the worker’s business and/or travel expenses, the worker is ordinarily an employee.
(14) Furnishing of tools and materials.
If the employer furnishes significant tools, materials and other equipment by an employer, the worker is generally an employee.
(15) Significant investment.
If a worker has a significant investment in the facilities where the worker performs services, the worker may be an independent contractor.
(16) Profit or loss.
If the worker can make a profit or suffer a loss, the worker may be an independent contractor. Employees are typically paid for their time and labor and have no liability for business expenses.
(17) Working for more than one firm at a time.
If a worker performs services for a multiple of unrelated firms at the same time, the worker may be an independent contractor.
(18) Making services available to the general public.
If a worker makes his or her services available to the general public on a regular and consistent basis, the worker may be an independent contractor.
(19) Right to discharge.
The employer’s right to discharge a worker is a factor indicating that the worker is an employee.
(20) Right to terminate.
If the worker can quit work at any time without incurring liability, the worker is generally an employee.
IRS Trust Fund Help – Trust Fund Penalties & LLC’s – Former IRS
If you need Trust Fund Help, call us today 1-866-700-1040.
Being Former IRS Agents many tax professionals call us with different tax related questions when it comes to certain issues with the IRS of a technical nature.
With IRS being very aggressive with payroll taxes and trust fund tax. IRS can hold those responsible for paying the payroll taxes responsible for the trust fund penalty or the payroll tax penalty. Those responsible parties will have to pay the withholding and one – half of the social security back to the IRS and will do so as part of an individual liability. Definition of a Responsible Person
A “responsible person” is one who has the duty to perform or the power to direct the act of collecting, accounting for, or paying over trust fund taxes.
When evaluating responsibility, consider the Supreme Court decision in Slodov v. United States, 436 U.S. 238, 78-1, USTC 9447 (1978).
IRS Trust Fund Establishing Responsibility.
Most trust fund recovery penalty cases involve officers of corporations. However, a responsible person may be one or more of the following:
a. an officer or employee of a corporation
b.a member or employee of a partnership
c.a corporate director or shareholder
d.a related controlling corporation
e. a lender, a surety, or any other person with sufficient control over funds to direct disbursement of the funds, or
f. in some cases, a person assuming control after accrual of the liability.
In each situation, determine who had a duty to see that taxes were withheld, collected, or paid over to the government at the specific time the failure occurred. There can be more than one responsible person.
How a LLC to the IRS standard
The LLC makes the election on how it is to be treated for Federal Income purposes on the Form 8832. If no election is made for a single-member LLC it is defaulted as a disregarded entity.
The Form 2553 is used by a corporation to make the “S” election.
An owner of a disregarded single member LLC for the purposes of the employment taxes will be liable for the employment taxes only to the extent of IRC 6672.
A Single-Member LLC’s , Employment Taxes and the IRS
A “single-member” Limited Liability Company (LLC) will not always protect you from being personally liable for un-paid employment taxes.
A “single-member” LLC is an LLC that is owned 100% by a single owner/member and is referred to as a single-member LLC. Based upon the “check-the-box” regulations for classification of entities, a single-member LLC can be treated as a disregarded entity whereby the owner, rather than the LLC, is treated as the taxpayer.
Under the check-the-box rules, a single member LLC automatically will be treated as as a “disregarded entity” unless an election is made to treat the LLC as a corporation.
To the surprise of many single-member LLC owners who have not elected to be treated as corporations, the IRS has been able to disregard the state-sanctioned liability protections of a single-member LLC and go after the individual owner’s personal assets for the employment taxes.
The IRS announced in Notice 99-6 that for a disregarded entity such as a single-member LLC, the owner of the entity retains the ultimate responsibility for the employment tax liabilities with respect to the employees of the disregarded entity.
Thus, if the LLC does not pay the payroll taxes, the IRS will proceed against the owner of the LLC. Even if the single-member LLC files for bankruptcy, the IRS can collect from the owner of the of the single-member LLC.
The liability for employment taxes is a greater amount than the Trust Fund Recovery Liability under IRC section 6672. The Trust Fund Recovery Liability is for the employee’s FICA tax withheld and the income tax withhold.
As an owner of a single-member LLC, the liability is for Trust Fund Taxes plus the employer’s FICA taxes and the unemployment taxes.
The good news is that per amended Treasury Regulations 1.34-1, 1.1361-4, 1.1361-6 and 301.7701-2 that became effective January 1, 2009; the owner of a single-member LLC will not be held liable for the employment taxes of the LLC for wages paid after January 1, 2009.
Still, the owner of the single-member LLC will be held liable for the Trust Fund Recovery Liability under section 6672 for those wages paid after January 1, 2009.
The bad news is that any unpaid payroll taxes owed for wages paid before January 1, 2009 are still the responsibility of the owner of the single-member LLC. The IRS will go after his personal assets for the unpaid employment taxes.
Trust Fund Help, Trust Fund Penalties & LLC’s , Former IRS, Payroll Tax Penalty
If you are undergoing a Payroll or Employment Tax Audit you better hire a professional tax firm because this is not a situation you want to lose. Being a Former IRS you should know these are dangerous tax audits. Make sure you get tax representation for this type of tax audit.
Once the IRS sets up a tax deficiency for payroll or employment taxes the IRS has the right to file federal tax liens and control the amount of money you can make as a result of owing back payroll taxes. IRS will control your spending.
Do not let the IRS bully you during a payroll or employment tax audit!
Call Fresh Start Tax LLC 1-866-700-1040, home for former IRS agents.
IRS does not take lightly the business owing payroll taxes because this is really not a tax but monies held on trust for the IRS and the FEDS.
The process works like this:
The IRS will pull a case from the CADE 2 computer for a tax audit and then notify the taxpayer / business of a payroll or employment tax audit.
The Agent will schedule a date for a meting usually at your place of business. It is better to have the audit at your representatives office.
The IRS can and will ask for back records generally for the past three years.The IRS Agent when finished, will issue a tax report in which you have the right to appeal. If the IRS feels there was a criminal element involved they have the right to refer the case to criminal division.
Most cases simply end up with a tax deficiency, IRS will then send you a bill and the IRS will be expecting full payment.
WHAT IRS LOOKS FOR DURING THE TAX AUDIT.
The IRS agent will be targeting employees to see whether or not they are true employees or self employed agents. There are common law tests to determine which classification a employee may fall under. This battery of questions you will find below will help the IRS agent determine in which category a employee may fall.
It is very important to remember there is not one factor used to make this determination but where the preponderance of evidence falls. If the IRS determines these workers are actually employees you will have problems because the IRS wants all of the back taxes plus penalties and interest.
Common law test for payroll tax audits or employment tax audits use by the IRS agent:
What was the:
Level of instruction. If the company directs when, where, and how work is done, this control indicates a possible employment relationship. The IRS will look for training manuals and policies the companies use. The IRS can use former employees to answer these questions as well.
Amount of training. Requesting workers to undergo company-provided training suggests an employment relationship since the company is directing the methods by which work is accomplished. The more training, the Service takes the position that the individual is an employer.
Degree of business integration. Workers whose services are integrated into business operations or significantly affect business success are likely to be considered employees. Those whose services are for the production of income to a great level are scrutinized more closely.
Extent of personal services. Companies that insist on a particular person performing the work assert a degree of control that suggests an employment relationship. In contrast, independent contractors typically are free to assign work to anyone. Once again this goes to control.
Control of assistants. If a company hires, supervises, and pays a worker’s assistant, this control indicates a possible employment relationship. If the worker retains control over hiring, supervising, and paying helpers, this arrangement suggests an independent contractor relationship. There are exceptions to this.
Continuity of relationship. A continuous relationship between a company and a worker indicates a possible employment relationship. However, an independent contractor arrangement can involve an ongoing relationship for multiple, sequential projects. Also, does the individual have another job or is this the sole source of their income. Is their license available to everyone?
Flexibility of schedule. People whose hours or days of work are dictated by a company are apt to qualify as its employees. Does the individual punch a time clock or is the employee free to come and go? Does the person have a key to the facility?
Demands for full-time work. Full-time work gives a company control over most of a person’s time, which supports a finding of an employment relationship. The IRS will look to see if the individual has other W-2 income.
Need for on-site services. Requiring someone to work on company premises—particularly if the work can be performed elsewhere—indicates a possible employment relationship. Are name badges and uniforms required?
Sequence of work. If the company requires work to be performed in specific order or sequence, this control suggests an employment relationship. Does the employee do the same thing every day?
Requirements for reports. If a worker regularly provides written or oral reports on their the status of a project, this arrangement indicates a possible employment relationship. Is there an evaluation given?
Method of payment. Hourly, weekly, or monthly pay schedules are characteristic of employment relationships, unless the payments simply are a convenient way of distributing a lump-sum fee. Payment on commission or project completion is more characteristic of independent contractor relationships. Time clocks tend to look like hourly employees. What does the tax return of the individual look like?
Payment of business or travel expenses. Independent contractors typically bear the cost of travel or business expenses, and most contractors set their fees high enough to cover these costs. Direct reimbursement of travel and other business costs by a company suggests an employment relationship. Does the individual have a company credit card or expense account, how about a possible credit card of the company?
Provision of tools and materials. Workers who perform most of their work using company-provided equipment, tools, and materials are more likely to be considered employees. Work largely done using independently obtained supplies or tools supports an independent contractor finding. The checking of the individual 1040 for a schedule C expense form is a good cross check for the IRS.
Investment in facilities. Independent contractors typically invest in and maintain their own work facilities. In contrast, most employees rely on their employer to provide work facilities. Are there incentive programs for the individuals?
Realization of profit or loss. Workers who receive predetermined earnings and have little chance to realize significant profit or loss through their work generally are employees. Is the individual on a pension system or health insurance?
Work for multiple companies. People who simultaneously provide services for several unrelated companies are likely to qualify as independent contractors. That is why the individual tax returns may be checked.
Availability to public. If a worker regularly makes services available to the general public, this supports an independent contractor determination. Does the individual have other business cards and is their business open to the public? Does the person have other work going on at the same time?
Control over discharge or firing. A company’s right to discharge a worker suggests an employment relationship. In contrast, a company’s ability to terminate or fire the independent contractor relationships generally depends on contract terms. Is there a contract between both parties. does it contain accurate details? You will find below a sample of a contract.
Right of termination. Most employees unilaterally can terminate their work for a company without liability. Independent contractors cannot terminate services without liability, except as allowed under their contracts.
We worked out of the local IRS offices in South Florida. We have over 60 years of direct IRS work experience.
We taught Tax Law at the IRS in South Florida.
You can hire a Former IRS Audit Managers.
We are local professional tax firm comprised of Tax Attorneys, CPA’s and Former IRS agents. 954-492-0088. Free Tax consults.
If you are going through or will be going through an IRS Payroll or Employment Tax Audit hire one of the most experienced tax firms in the South Florida area.
We have on staff Board Certified Tax Attorneys, CPA’s Former IRS Audit and Tax Managers who have worked over 60 years for IRS in the South Florida IRS Offices. We have handled hundreds of employment and payroll tax audits.
Beware of the IRS Payroll Tax Audits, they can be very devastating. Besides owing money from the business side IRS has the right to collect individually as well.
Payroll or Employment tax audits can have very damaging effects. Do not go into this type of audit unrepresented. Get a professional tax team to represent you on this payroll or employment tax audit.
If this tax is set up against your company, the IRS can and probably will hold you personally responsible for the tax if you cannot pay the audit adjustment in full if one is made against you. We have former IRS employees who have already worked this program while at IRS. They can help you through this problem.
The professional team that can represent you:
* Former IRS agents who worked this program while employed at the Internal Revenue Service
* Former IRS instructor that taught courses on these issues while at the IRS
* Board Certified Tax Attorneys
* CPAs licensed to practice
Some of the benefits of immediate professional representation with these payroll tax or employment tax audits
* You do not have to talk with the Internal Revenue Service, we show up in your stead
* You know your case will be handled and resolved as fast as possible
* You know you are getting the very best deal possible and save the highest amount possible
What are the dangers of self representation
* Be aware of the far reaching power of the IRS
* Be aware of the detailed asset search that the IRS can use
* Be aware that the IRS may not really be closing your case
* Be aware that the IRS is securing information about you to collect the tax in full
Why the IRS works better with a professional company than me the taxpayer
* Professionals know what IRS is looking for
* Professionals know how to limit the scope of the investigation
* Professionals know how to get the case settled and work out a payment plan if needed
* Asset protection is necessary
How the IRS processes works for determinations of payroll or employment tax audits
The Internal Revenue Service has a process called the common-law test. These common factors determine what side of the fence the person falls on, that of an employer or that of an employee.
The IRS Agent will look where the ponderousness of evidence falls before making their determination on each case. No two audits or cases are ever the same. There are different nuisances with each and every case.
The IRS form SS-8 will lay out the common law tests.
IRS Payroll Tax Audit – Professional Audit Tax Help – Fresh Start Tax – Miami, Ft.Lauderdale, West Palm
Fresh Start Tax 954-492-0088 South Florida’s Premier Tax Firm for IRS Payroll and Income Tax audits.
Former IRS Agents, Managers .
We have over 60 years of direct IRS expereince out of the South Florida IRS offices.
We know the system. We can stop the worry today.
Our tax practice is dedicated to IRS Representation. Our tax professionals have been serving the South Florida area since 1982. We are comprised of Former IRS agents ,managers and instructors along with Board Certified Tax Attorney’s and CPA’s. We have 205 years of direct IRS experience.
As former IRS agents we use to audit companies for payroll tax audits. We know all the tax strategies for the very best resolution.
How IRS makes their determinations:
To determine whether a worker is an independent contractor or an employee under common law, you must examine the relationship between the worker and the business. All evidence of control and independence in this relationship should be considered.
The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and the Relationship of the Parties.
Behavioral Control.
covers facts that show whether the business has a right to direct or control how the work is done, through instructions, training, or other means.
Financial Control.
covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.
This includes:
* The extent to which the worker has unreimbursed business expenses
* The extent of the worker’s investment in the facilities used in performing services
* The extent to which the worker makes his or her services available to the relevant market
* How the business pays the worker, and
* The extent to which the worker can realize a profit or incur a loss
Relationship of the Parties covers facts that show how the parties perceive their relationship. This includes:
* Written contracts describing the relationship the parties intended to create,
* The extent to which the worker is available to perform services for other, similar businesses,
* Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay,
* The permanency of the relationship, and,
* The extent to which services performed by the worker are a key aspect of the regular business of the company
Call us today to have Former IRS agents who worked out the local IRS get you results.
Hire Former IRS Agents who worked out of the local South Florida IRS offices. We have over 60 years of direct work experience right here in the local IRS offices.
Stop your worry today. 954-492-0088.
After years of working at the IRS, Fresh Start Tax is one of the finest firms for tax representation anywhere. We are comprised of former IRS Agents, Managers, and Instructors. Call us today so you never have to speak to IRS. IRS has put out a list of the most frequently asked questions about tax audits.
Audit Facts:
IRS Audits 1% of all tax returns under $200K
IRS Audits 2% of returns upward to $10 million
IRS Audits 6% of returns from $10 million and up.
IRS Audit FAQs
Does the IRS ever contact a taxpayer or the tax preparer via e-mail to initiate an audit?
Does filing an amended return affect the return selection process?
Why was my return selected for audit?
Where will the audit be held
Can you request the audit be conducted at the IRS office instead of at your place of business?
Can the audit be transferred to another IRS office?
How long should the records related to a business or other long-term asset be kept
How long should payroll records be kept?
After an auditor completes the audit, will the case be reviewed to ensure the audit results are correct?
It’s time for my appointment and I’m not ready. What do I do?
How far back can the IRS go to audit my return?
Answers to the FAQ’s
Does the IRS ever contact a taxpayer or the tax preparer via e-mail to initiate an audit?
The IRS does not contact an individual via e-mail for an initial appointment. Contact related to being selected for an audit will be made via telephone or mail only, due to disclosure requirements.
Does filing an amended return affect the return selection process?
Filing an amended return does not affect the selection process of the original return. However, amended returns also go through a screening process and the amended return may be selected for audit.
Why was my return selected for audit? When returns are filed, they are compared against “norms” for similar returns. The “norms” are developed from audits of a statistically valid random sample of returns. These returns are selected as part of the National Research Program which the IRS conducts to update return selection information.
The return is next reviewed by an experienced auditor. At this point, the return may be accepted as filed, or if based on the auditor’s experience questionable items are noted, the agent will identify the items noted and the return is forwarded for assignment to an examining group. Upon assignment to a group, the return is reviewed by the manager. Items considered in assigning a case are: factors particular to the area such as issues pertaining to construction, farming, timber industry, etc. that have specific factors and rules that apply. Based on the review, the manager can accept the return or assign the return to an auditor. The assigned auditor again reviews the return for questionable items and either accepts it as filed or contacts the taxpayer to schedule an appointment.
Where will the audit be held?
It depends on the type of audit being conducted.
Audits by Mail/Correspondence Audit: Some audits are conducted entirely by mail. If the audit is conducted by mail, you will receive a letter from the IRS asking for additional information about certain items shown on the tax return such as income, expenses, and itemized deductions.
In-Person Audits are audits conducted either at a local IRS office or at your business location.
Can you request the audit be conducted at the IRS office instead of at your place of business?
If the audit has been scheduled to be conducted at your location, it will generally be conducted where the books and records are located. Requests to transfer the audit to another location, including an IRS office, will be considered but may not be granted. Treasury Regulation 301.7605-1(e), Time and place of audit, discusses the items considered when a request for a change in location is made.
Can the audit be transferred to another IRS office?
You can request a transfer of an audit if you have moved. Several factors will be considered such as your current location, the location of the business and where the books and records are maintained.
If the audit is by correspondence, you can request a face-to-face audit because the books and records may be too voluminous to mail.
How long should the records related to a business or other long-term asset be kept?
In the case of an asset, records related to the asset should generally be kept for as long as you have the asset plus three years. If the asset was exchanged, the basis for the new asset may include the exchanged asset so the records for both assets will need to be retained until the new asset is disposed plus three years from the file date of the tax return for the year of disposition.
How long should payroll records be kept?
In general, payroll records should be kept for six years with a review of the file to see if any items relating to current employees should be retained with current records.
After an auditor completes the audit, will the case be reviewed to ensure the audit results are correct?
All cases may be reviewed by the auditor’s manager either during the audit or upon completion. If errors are noted by the manager, the auditor will contact you to advise you about the proposed correction and what impact this may have on the amount of tax due.
It’s time for my appointment and I’m not ready. What do I do?
If you do not have all the information requested, contact your auditor at the number reflected in the notification letter to discuss what information is currently available. It may be possible to begin the audit with the information available rather than postpone the appointment. The quicker the audit begins, the quicker it can be resolved. In addition, if the initial appointment is scheduled beyond 45 days from the initial action, managerial approval is required.
How far back can the IRS go to audit my return?
Generally, the IRS can include returns filed within the last three years in an audit. Additional years can be added if a substantial error is identified. Generally, if a substantial error is identified, the IRS will not go back more than the last six years.
The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly most audits will be of returns filed within the last two years.
If an audit is for an older year, you may be requested to extend the statute of limitations for assessment of your tax return. The statute of limitations limits the time allowed to assess additional tax. The statute of limitations is generally three years after a return is due or was filed, whichever is later. There is also a statute of limitations for making refunds.
If the audit is not resolved and the statute of limitations date is nearing, you may be asked to extend the statute of limitations date. This will allow you additional time to provide further documentation to support your position, request an appeal if you do not agree with the audit results, or to claim a tax refund or credit. It also allows the IRS time to complete the audit and provides time to process the audit results.
You do not have to agree to extend the statute of limitations date. However, if you do not agree, the examiner will be forced to make a determination based upon the information they currently have. Therefore, the examiner may not be able to consider additional adjustments, such as expenses, that could lower the amount of tax due.
The information is taken and extracted form the irs.gov site.
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