Fortunately, your odds of being audited are pretty low – the IRS audited just 0.6 percent of all individual returns during the 2016 fiscal year. The likelihood a business will be audited is similarly low – the IRS audited about 1.1 percent of corporation income tax returns during FY 2016.
But the IRS isn’t the only agency that conducts audits. More fearsome than the idea of getting audited by the IRS for many employers is the prospect of a DOL audit (Department of Labor).
The Department of Labor (DOL) is the main federal agency regulating and enforcing laws relating to employment. (There are a few other federal agencies that get involved when it comes to employment issues – DOJ, IRS, EEOC, NLRB – not to mention all the agencies on the state level, but the DOL is probably the most prevalent in business owners’ minds.)
Within the DOL are several agencies charged with the enforcement of specific acts or regulations, such as the Wage & Hour Division (WHD), Occupational Safety & Health Administration (OSHA), Employee Benefits Security Administration (EBSA), Office of Federal Contract Compliance Programs (OFCCP), and Mine Safety & Health Administration (MSHA).
A business might become the subject of a DOL investigation (commonly referred to as a DOL audit) due to a suspected violation of any rule or regulation enforced by one of these enforcement agencies.
The DOL can choose to audit an employer at any time, but most often audits are initiated when a complaint filed by a current or former employee, or as a result of the DOL’s efforts to target specific low-wage, high-violation industries (agriculture, child care, food services, health care, landscaping, retail, etc.)
Curious about how many investigations the DOL’s enforcement agencies conduct? Check out the agency’s enforcement data website: https://enforcedata.dol.gov.