The Internal Revenue Service will be auditing the employment taxes paid by 5,000 randomly selected for-profit and non-profit employers beginning in November, a Littler Mendelson attorney recently warned.

According to attorney GJ Stillson MacDonnell, the audits will provide the IRS with the statistical sample of overall employment taxes compliance. The audit program will be conducted over a three year period with at least 2,000 employment tax audits conducted per year, and will include for-profit and non-profit employers.

“Employers need to be prepared now for a potential IRS employment tax audit,” MacDonnell says, observing that the focus of the employment tax audit will be in four areas: worker classification, fringe benefits, reimbursed expenses, and compensation of owner employees. In addition to these focus areas, an employer should expect a general review of the completeness and accuracy of W-2 forms, the calculation of withholding as well as the timeliness of tax deposits and reports, she says.

MacDonnell suggests that employers take steps to prepare, including the initiation of an internal review of employment taxes compliance now. She also advises employers to immediately update mail processing procedures to monitor for audit notice; consider designating an “Employment Taxes Czar” with suitable support to review current employer compliance, manage audits and make recommendations for adjustments; engaging the assistance of outside expertise as early in the process as possible; and deferring the scheduling of any IRS (or other) employment taxes audit appointment until an internal analysis can be conducted and necessary records reviewed and organized.