Well the IRS is at it again. Feeling emboldened as a result of the existing administration’s mission to squeeze as much tax out of individuals and businesses as possible, so that it can be redistributed to support those that want to depend on government for their existence, the IRS has announced another round of what was once called Taxpayer Compliance Measurement Program (TCMP).
The infamous TCMP audit was a grueling line-by-line examination of randomly selected tax returns audited to compile statistical data for the Discriminate Function System (DIF) database. This is a computer program that compares every line of your tax return with national and regional averages. If any line of your return is higher than average, the difference is scored. The IRS believes that the higher the score, the more likely it is that a tax deduction can be disallowed. Consequently, the higher the DIF score, the greater your chances of being audited.
Now it seems the IRS is turning its sights onto employment taxes with the new Employment Tax National Research Project (NRP). The agency will audit 2,000 businesses every year from now through 2012. Again statistical information will be compiled and software developed to test compliance. Ultimately this will drive the extent to which businesses will be audited. Since the IRS commissioner promised roughly a 30% increase in the number of tax audits, I think that it is safe to assume this is a first step in that direction.
Author Anita Campbell suggests that it’s time to tighten things up on the compliance front for those of you who haven’t. I agree completely.
See her article at How the new wave of IRS audits will affect your small business.
This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.
