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Discussion:PA UC Audit vs IRS Audit

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Discussion Forum Index --> Accounting Questions --> PA UC Audit vs IRS Audit

Taxman75 (talk|edits) said:

27 September 2013
I have a client who was audited by the PA Unemployment Bureau. They reclassified outside labor dollars as wages and assessed Unemployment tax. The TP couldn't establish the contractors as independent. Does anyone know or have an opinion on whether or not PA UC will automatically alert the PA Dept of Rev and/or IRS as to the reclassifications and trigger either another audit or at least require the TP to file amended payroll reports for the periods affected?

Should the TP be proactive and correct the reports now or wait until they receive notice from tax authorities?

Taxman75 (talk|edits) said:

28 September 2013

Szptax (talk|edits) said:

28 September 2013
PA UC rules for independent contractors are different than those for the IRS - employee vs IC. Your client should, among other things, make sure that his subcontractors have liability insurance. You can find the information on the PA UC website.

Mr cheese (talk|edits) said:

12 October 2013
I'm not familiar with the policies followed by PA, but I'm preparing to represent a client that is about to undergo a CA EDD "Status Audit". Same problem.....misclassification of workers as independent contractors. For a while now, the EDD has been cooperating and sharing a lot of it's information with the IRS. Therefore, an EDD audit can often lead to an IRS employment tax audit and visa, versa. Also, the EDD has the power to request a business' state income tax returns as well as the state payroll tax returns and tax information returns (W-2's & 1099-Misc's). If you can survive both a state and federal payroll tax audit, then you better be prepared for the possibility of a state and/or federal income tax examination.

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