Beginning this year the Internal Revenue Service will begin its first Employment Tax National Research Project (NRP) in 25 years. This initiative is meant to collect data that will allow the IRS to understand the compliance characteristics of employment tax filers. Each year for the next three years the IRS will randomly select 2,000 taxpayers to audit as part of the NRP. What does this mean for contractors? The main reason behind the NRP is to take a closer look at employee classification. As the construction industry commonly deals with employing subcontractors and independent contractors, the proper classification of these people and thus paying appropriate taxes is an area of compliance that contractors need to be aware of. Though the 2,000 taxpayers selected to be audited as part of the NRP is for all businesses and not just aimed at the construction industry, the overall goal of this initiative is to help the IRS select and audit future employment tax returns with the greatest compliance risk which could affect contractors. For more insights on the IRS' National Research Project, listen to this episode of the Construction Business Podcast.
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