What Occurs During a Compliance Check
What To Expect in a Compliance Check
|What occurs in a Compliance Check?|| |
A compliance check will generally include the review of the following filed tax returns and information returns:
The FSLG Specialist will:
|Scheduling Opening Interview||Generally, an FSLG Specialist will contact the government entity by telephone to schedule an appointment to conduct a compliance check interview. During this call, the Specialist will discuss with the taxpayer the difference between a compliance check and an examination. The Specialist will request information and/or documents from the taxpayer that are needed to perform the compliance check. Letter 3575, FSLG Compliance Check Opening Letter, will be issued to the taxpayer along with Publication 1 (Your Rights as a Taxpayer), Notice 609 (Privacy Act Notice), Publication 3114 (Compliance Checks) and Form 4564, Information Document Request.|
|Information Document Request||An IDR is issued to a taxpayer to request information and/or documents the Specialist needs to review to perform the compliance check. An IDR sent with the Letter 3575, FSLG Compliance Check Opening Letter, will list the specific information and documents the taxpayer should have available at the initial appointment. Another IDR may be issued to the taxpayer following the initial interview to request information and documents needed to support issues that were discussed during the initial interview but not available at that time. Additional IDRs may be sent to the taxpayer until all compliance issues are resolved. IDRs will always have a deadline for information to be received. If the organization believes it needs more time to gather and provide the information, it should contact the FSLG Specialist to discuss a more reasonable date. The compliance check process can be completed in a professional and timely manner when the IRS and Taxpayer/POA work cooperatively together.|
|Additional items that will be reviewed during compliance check|| |
Internal controls and evaluation procedures the taxpayer used for:
This will help determine whether or not the taxpayer has a process in place to file all of the required Forms 1099.
Filed information returns for indications that the amounts and information reported are complete and correct:
The Specialist will provide employee/independent contractor information to the taxpayer, but will not ask questions related to this issue or make any determination related to the organization’s worker classifications.
The Specialist will ask whether the organization has employee pension plans. If there is a 403(b) and/or 457 plan, Specialists will consider basic eligibility rules, review Forms W-2 for excessive contributions, etc.
|Sample Interview Questions|| |
The following are a sample of questions that might be asked during the opening interview:
|Possible Outcomes|| |
Based upon the information gathered, the FSLG Specialist will determine whether or not to begin an examination.
The FSLG Specialist will recommend no examination when:
If no examination is warranted, the Specialist will prepare and issue Letter 3576, FSLG Compliance Check Closing Letter. The compliance check closing letter allows the Specialist to outline the findings and make corrective recommendations. The recommendations are to encourage future compliance and to provide documentation that certain issues were discussed.
If an examination is warranted, the FSLG Specialist will notify the taxpayer that the entity is currently under audit and inform the taxpayer of the rights provided under audit. In addition, the following will generally be provided: Letter 3850, Employment Tax Examination Opening Letter, Pub 3498, The Examination Process, and Form 4564, Information Document Request, etc.