The IRS dropped a gentle hint last week that it really, really isn’t kidding about a long-planned audit campaign to examine employment tax and worker classification issues. The audits, originally scheduled to start in October of this year, are now slated for February 2010.

The agency will look at 6,000 randomly selected companies of all types and sizes, and it plans to dig deeper than it does in typical audits, according to remarks by IRS deputy commissioner Faris Fink reported by Reuters.

Fink noted that “a significant portion” of the estimated $345 billion in taxes that goes uncollected in the United States each year is attributable to employment tax issues.

Firm figures for that portion are hard to come by, but a Treasury Department study published in July this year found that taxpayers underreported FICA tax liabilities by $14 billion and unemployment tax by $1 billion in 2001.

Worker misclassification is a smaller revenue target but an important focus for the upcoming audit drive. In 2000, 10 percent to 30 percent of firms misclassified some of their employees, according to a recent report from the Government Accountability Office.

Interestingly, reports last week suggest that the IRS has lost some ground in its epic, decade-long battle with FedEx over the company’s classification of its delivery drivers as independent contractors. The agency has climbed down from a $14 million dollar assessment it imposed last month for 2002 taxes and penalties, CNN reports. But the battle continues and may go another ten years — who knows?

It would be unwise to assume from this, though, that the IRS is easing up on employee classification issues. In fact, this might be a good time to set up an internal review of all aspects of employment tax compliance to identify potential issues and evaluate financial risks. ###