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Employment Tax Audits Are Coming, So Businesses Must Prepare

Updated: Jun 26, 2023

Employers should consider conducting internal audits that address compliance risks to smooth the waters ahead of a possible IRS audit, say Ivins, Phillips & Barker’s Tom Cryan and Spencer Walters.

Thousands of auditors are being hired and trained as part of the Inflation Reduction Act’s $80 billion in funding for modernizing the IRS. We anticipate a significant increase in audit activity will focus on executive compensation, fringe benefits, and employment tax compliance. To prepare for potential audits, employers should review their payroll and employment tax administration practices. Internal audits can identify compliance risks, address them before penalties are assessed, and demonstrate good-faith efforts in the event of a subsequent audit by the IRS or state taxing authority.


Employment Tax

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