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Deloitte’s take on employment tax audits

Have you considered a strategic employment tax review?

Multi-layered regulations from local, state, and federal authorities, and a multitude of complex requirements often cause organizations to overlook employment taxes. Employment tax services can not only help gain compliance, but also provide tax savings. A strategic review is a great place to start.

Employment taxes: Complex but critical

With US employment tax governed by federal, state, and local laws, complying with the various tax reporting and withholding rules in a single jurisdiction can be challenging. Considering the way today’s employers expand operations into more and more jurisdictions through internal growth and acquisitions, managing compliance, and reducing employment tax related costs has become more and more burdensome—and critical.

Many organizations manage their corporate income tax rate and compliance very effectively, but employment taxes often get overlooked. Given the IRS recently notified Congress of its plan to increase employment tax compliance checks across the country, it’s critical that organizations focus more acutely on their employment tax compliance.

A strategic employment tax review (SETR) can help companies assess their existing processes for paying taxes on employees, identify tax compliance gaps and risks, and develop an action plan for future compliance. At the same time, this employment tax service can also be useful in identifying possible refund opportunities or tax savings.

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Providing peace of mind

Imagine receiving an information document request from an auditor seeking details relating to any of the following:

  • Timing of tax deposits on deferred compensation awards, including non-qualified ESPPs, and other employee stock plans
  • Tax withholding records for business travelers performing services in other states
  • Employee handbook, to see if all benefits (meals, travel, etc.) are properly included in taxable wages
  • Forms 1099-Misc, to see if recipients are properly classified as employees

Would you be confident that you are compliant in these complex areas of employment tax?

Through an SETR, you may be able to increase your level of confidence and reduce the risks associated with employment tax audits and noncompliance.

In our experience, an SETR can be especially beneficial to companies which:

  • Have increased employee head count through M&A activity in the past three years
  • Have restructured employing entities
  • Have prospective acquisitions that include employees
  • Have significant state employment tax compliance notices
  • Are paying SUI taxes at highest rates
  • Are unsure of current level of employment tax compliance

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Did you know?

Employment taxes withheld by employers account for nearly 72 percent of all revenue collected by the IRS. (IRS Pub. 5084, Rev. 8-2019)

Procuring new tax savings

Reviewing your approach to paying taxes on employees not only increases your chances of staying compliant with IRS guidelines, but can also identify potential benefits of which you may have been previously unaware. These include:

Employment taxes that work for you

Whether you’re motivated by the prospect of a potential IRS audit or potential tax savings opportunities, it might be time for an employment tax audit so your company can analyze and potentially improve its employment tax position.

Starting to think seriously about an SETR? Download the PDF and contact us to learn more

Let's talk

Sean Trotman

Deloitte Tax LLP
+1 212 436 2211

Eira Jones
Client Service Executive

Deloitte Tax LLP
+1 415 783 7638


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