Does an employer need the help of a specialist to deal with an employment tax audit?

Question

Does an employer need the help of a specialist to deal with an employment tax audit?

Answer 1

Who is doing the audit?

What business structure do you have?  Who works for the business and how are they paid?

In recent years, the IRS has been focusing on "reasonable compensation" to owners/family members and worker misclassification (calling someone a contractor when they are actually an employee).  To a lesser extent, the IRS is reviewing situations where someone gets both a W-2 and a 1099-Misc from the same payer.  

What do you expect the "specialist" to do for you?  Having someone try to justify reasonable compensation after the fact doesn't work to well...but presenting the case that contractors are in fact contractors may be worth paying for.  The tax and penalty if found in error is prohibitive.

Answer 2

If your state or the IRS is auditing you, I'd definitely get representation from a CPA or even better, an enrolled agent.

Answer 3

Half of smart is knowing what you are dumb at.  If the employer is not comfortable in handling it himself, retaining someone who knows the subject will be money well spent.