Many employers rely on their bookkeepers, CPAs or other tax preparers To complete and file their Form 941 Employer's Quarterly Federal Tax Returns and Form 940 Unemployment Tax Returns.

The problem with relying on others and providing them with the amount of wages, withholdings and other data, is that they most of the time they do not view the wage journals or other records to verify that the amounts are correct. There are also situations in which employer's classify the people who work for them as independent contractors instead of employees. Pay their workers cash in lieu of checks to avoid paying social security and Medicare taxes.

How to avoid audits or adjustments to employment taxes.

1) Make sure your calculations for wages, tax withholdings, Tips and other items provided to tax return preparers are Correct. Double, no triple check your numbers. Remember, Your tax preparer is not at fault for incorrect information.

2) Compare the four quarterly Form 941 Employer's Quarterly Federal Tax Return amounts with the amounts reported on W-3 Transmittal of Income and Tax Statements and all W-2 Wage & Tax Statement issued. Tax agencies utilize this information to conduct adjustments to employment Tax balances. Many employers get these types of adjustment Notices and do not understand why they owe.

3) If you hire someone to provide services on an on-going basis, You control what needs to be done, the hours required to perform The job, and reimburse person for tools, materials purchased. Then, This person is considered an employee. Do not think that as a Business owner you will get away with paying cash for too long. Tax Agencies are buckling down on these types of transactions. How do they find out? Same person who you now fired or got Injured will seek compensation at the state or federal level. When The agency finds out that you paid them cash. Then, all your Savings for not paying employment taxes will come back to haunt You.

4) Tax Agencies compare tax return filings between them. For example, The quarterly Form DE-7 State Quarterly Employment Tax Return Is compared to the Federal Form 941 Employer's Quarterly Federal Tax Returns filed. If there are discrepancies, they will adjust your Tax balances due.

5) You want to save money by not reporting all the wages paid right? So, you fail to report all the wages, withholdings, and social security Taxes and Medicare taxes required. This will cost you more in the Long run. Tax agencies have field auditors specialized in seeking And finding employers who underreport the number of employees And wages paid.

So, if you think you are saving money for your business by conducting any of the above activities. Then, be prepared to be audited or getting an adjustment to your employment tax debt by tax agencies. You will pay a great deal for penalties, interest and taxes.

Immediately seek professional help if you do not understand an adjustment letter or the outcome of an audit for employment taxes. Do not attempt to resolve these types of issues on your own unless you fully understand the basis for these types of assessments/tax bills.