In last month’s issue of the Employment Law Commentary in Part I of our series on independent contractors, we noted that the Internal Revenue Service has recently rolled out a three-year audit initiative targeting 6,000 businesses randomly selected from across the country, 2,000 per year. The first group of businesses has already started to receive audit appointment letters notifying them of the IRS’s intent to conduct a general review of their worker classifications and related employment tax issues. Some states are following the IRS’s lead and are conducting their own worker classification studies though we are not currently aware of any formal audit initiative yet in any state. We focus in this issue on what to expect should your company come under audit by the IRS and offer advice on some best practices for managing your audit.

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