HOME   TIPS CALENDAR NEWSLETTER   Need an Accountant For Your Taxes Gerald Kramer The AZ CPA 4531 N 16th St Suite 126 Phoenix, AZ 85016 Fax: (602) 279-1766 The IRS Is Targeting Small Business Concerned about widespread noncompliance with employment tax rules, The IRS is targeting small businesses. S Corporations. Some taxpayers appear to be structuring businesses as S Corporations so they can pay themselves low salaries, which are subject to payroll taxes, and pay out the company's remaining profits as corporate dividends, which are not subject to payroll taxes. According to the IRS this isn't appropriate tax avoidance because the low salary does not reflect the economic reality and to collect related payroll taxes, penalties and interest. Nonfilers. In addition to reducing the number of taxpayers who fail to file any employment returns at all, the IRS is particularly interested in small businesses who are with holding payroll taxes from employee paychecks but not actually filing employment returns or remitting the collected taxes. Fringe Benefits. Cash payments to employees that are labeled non-taxable health plan reimbursements but which are not truly tax-exempt under current rules are also of particular concern to the IRS. The IRS in February unveiled a new form for filing employment taxes, it hopes will simplify payroll tax reporting and reduce errors. Taxpayers seeking to reduce or avoid payroll taxes by using a strategy that does not follow IRS requirements and rules or that fail to reflect economic realities may very well find themselves under increased audit scrutiny.