What's New:
IRS Audit Targets
A major thrust of recent IRS audits of businesses and nonprofits is to ensure that the entity is complying with the tax laws. So we recommend that you review your current operations with the following in mind:
1. You are supposed to include the "personal use" value of employer provided cell phones in the benefited employees' gross incomes. Although there is a bill pending in Congress to make personal use of a cell phone a de minimis fringe benefit for income tax purposes, IRS agents are enforcing the existing law until Congress changes it.
2. Because of unreported income issues, the IRS is looking closely at individuals performing services for you that it thinks you have misclassified as an independent contractor rather than as an employee. For example, you supervise the individual in their work, he/she works full-time for you and for no one else, has no other significant clients, and gets paid by the hour rather than by the job. These are indications of employee rather than independent contractor status. You could have to pay back taxes and employee benefits.
3. One of the local IRS agents is recommending that you not write an accounts payable check unless you have a signed form W-9 from the vendor with their federal employer identification number or Social Security number on file. It is not too early to add that as a requirement and to go through your payment records and verify that you have that form or some other writing with the same information for which you will be issuing a 2010 form 1099-MISC for total payments to any one vendor of $600 or more in 2010 for services rendered. You are not required to issue 1099s for corporate vendors but don't assume the use of "company" in their name means they are incorporated. Also, you are required to provide a 1099 for payments to lawyers, and for rents and medical care payments other than for health insurance premiums (e.g., drug testing costs), among other specified categories, regardless of whether or not the vendor operates in corporate form.