Employers that are audited by the Internal Revenue service need not provide an excessive amount of information, a speaker said May 7 at the 2013 American Payroll Association Congress in Grapevine, Texas.

“We will ask for any documentation we need to verify what’s on your return,” said Sarah Plowman, senior policy analyst for the Internal Revenue Service. If an employer files a Form 941, Employer’s Quarterly Federal Tax Return, for example, Forms W-2s, and payroll records also may be requested by IRS.

“I’d rather have you give me what I need and then if something else comes up I can ask for it,” Plowman said. “It’s not necessary to give an auditor everything, but give them what they ask for.”

Here are frequently asked questions from employers on IRS audits:

How does an audit begin? IRS sends a notice or letter, Plowman said. Generally, the notices are automated, and there are 26 varieties. Additionally, an examiner calls or sends a letter to the employer, and provides notices and a request for information, she said.

If, for example, a Form 941 was filed for one quarter, other quarters can be requested, Plowman said. If there is an issue with fringe benefits, an employer’s accounts payable records also can be requested, she said.

 What if I ignore the IRS? The IRS will continue to send notices, Plowman said, adding that the audit process will likely continue, adjustments can be made, and penalties can be assessed. “If we don’t hear your side of it, we will make the adjustments based on what we know,” she said.

What if I refuse to cooperate? If an employer refuses to provide information and comply with the audit, the examiner will proceed by using available information, such as internal documents. “If we have the taxpayer’s help, it shortens the process,” Plowman said.

How does an audit work? To begin an audit, an examiner sets an appointment and will send an information document request, Plowman said. The examiner will then perform the examination at the business site, interviewing responsible parties, and reviewing books and records, Plowman said. “We cannot disclose to anybody that a business is under audit,” she said. Generally a letter is sent to a principal in the business.

Can I refuse an IRS audit? Employers cannot refuse IRS audits. IRS tries to minimize the burden, but a certain amount of information is necessary from the employer, Plowman said. Without employer assistance, IRS can take about six months to obtain Forms W-2 and 1099, which prolongs the audit.

Is an employment tax examination different? Employment taxes should be considered trust fund taxes and not the business’s money, Plowman said. “its money taken from employees,” she said, adding that the employer contribution plus employees’ contributions are used for Social Security and other programs.

Do I have to handle an examination by myself? An employer can choose to be represented by a federally authorized practitioner, such as a lawyer, a certified public accountant, an enrolled agent, or the third-party who prepared and signed the return. The practitioner must provide Forms 2848, Power of Attorney and Declaration of Representative, or 8821, Tax Information Authorization. The IRS also needs someone who has access to employment records, Plowman said.

Are audits always done at the business location? Employment tax audits are generally conducted at the business locations to expedite the audit, Plowman said, adding that agents then have an idea about how the business operates. Some audits are handled remotely or can take place at an IRS office or the office of a representative that the business hires to handle the audit, she said.

What if I do not have a representative? Employers without a representative at the audit should relax and be truthful, Plowman said. Any requested information should be provided and no documents should be manufactured, she said.

What if my business owes money?  If an employer owes money after the audit concludes, an installment agreement may be sought by completing Form 9465, Installment Agreement Request. Employers with up to $25,000 in combined taxes, interest, and penalties can make the request online, Plowman said. Employers owing more than $25,000 must mail in Form 9465 and include 433-F, Collection Information Statement.

 How can I avoid problems? To avoid potential issues and IRS audits, employers should file tax returns in a timely manner, avoid participation in abusive schemes, act on notices they receive, and educate themselves, Plowman said. Employers also can use social media and technology for assistance via IRS’s Facebook, Twitter, iTunes podcasts, webinars, and main webpage, irs.gov, she said.

By Kristin N. Washington