Business Consultants Under The Microscope - Internal Revenue Service - Brief Article

California CPA, August, 2001

The IRS is encouraging audits of business consultants and has recently published a new audit techniques guide to assist examiners with their audits of these individuals.

Under scrutiny are an individual's status as an independent contractor or employee and tax returns to determine unwarranted expense deductions for business travel as well as the separation of business and personal travel. Also under the microscope is the proper classification of meal and entertainment expenses.

Businesses that hire consultants will be examined to determine if the consultants are actually employees who should be subject to tax withholding by their employers.

A PDF version of the guide is available at http://ftp.fedworld.gov/pub/irs-mssp/a9buscon.pdf. You will need Acrobat Reader to view the document.