IRS targets Texas broadcasters

posted on 11.09.2007

TAB learned today that the Internal Revenue Service has begun targeted tax audits on radio stations in Texas.

Broadcasters whose stations already have been audited said the federal agents are looking for three areas of suspected abuse:

 1) paying commissioned sales people as if they were independent contractors, to avoid FICA payments

 2) operators paying themselves only a portion of corporate profits rather than a salary subject to withholding

 3) excessive claims for entertainment or travel expenses

?They told us they were trying to establish some benchmarks for broadcasting on expenses,? one audited East Texas broadcaster reported.

A South Texas broadcaster said the agent who combed his books reported federal authorities are looking for two specific types of income tax treatment viewed as problematic by the federal agency.

?The IRS is trying to catch radio business operators who are paying commissioned sales people as if they were independent contractors, to avoid FICA payments,? he said.

?The Service is also targeting radio operators who pay themselves nothing on the payroll, electing to use a Sub-S Corporation (IRS Business Code #541600) as a general partner and avoiding FICA or self-employment on their own earnings (by simply distributing profits to themselves as a limited partner),? he said.

All the audits are looking at radio broadcasters using IRS Business Code #515100.

Questions on expenses involved the 2005 tax year. 

Inquiries on how salaries and payrolls were treated and fringe benefits such as 401(k) and cafeteria plans covered 2004-2006.

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