The Internal Revenue Service is launching a comprehensive study built around an exhaustive audit program to determine how fully—or not—companies are complying with employment tax reporting and payment obligations, most notably payroll taxes, fringe benefits, independent contractors, expense reimbursements, and other related payroll issues.

It’s the first such undertaking in 25 years, according to the IRS, prompted by the significant changes that have taken place in business practices with respect to employment tax issues. The Employment Tax National Research Program will begin with 2,000 random audits of taxpayers over each of the next three years for a total of 6,000 examinations.

The IRS said it is doing the study to get a better grip on the compliance characteristics of employment tax filers. The results will be used to gauge the extent to which businesses generally comply with employment tax law and the related reporting requirements. It also will help the IRS identify tax returns with the greatest risk for non-compliance.

The IRS stated two main goals for the study: to compile “statistically valid information” for determining the employment tax gap, or the amount by which employment taxes are underpaid, and to determine what areas of employment tax lead to the most compliance problems.

David Fuller and Jerry Holmes, attorneys at the law firm of Morgan Lewis & Bockius and former IRS managers, said companies selected for the audit can expect it to be painful. According to their description of the audits in a Thompson bulletin, they’re not surprised by the issues the IRS is targeting, but they’re taken aback by the planned scope.

“Even the most conservative taxpayers and those most closely in compliance will not be spared the expense of defending themselves in one of these ‘comprehensive’ audits, since the IRS is trying to collect detailed audit data even from conservative taxpayers,” the pair wrote.

Their inside sources at the IRS said the audits will be “excruciating” and somewhat like seeing a proctologist, Fuller and Holmes said. “While perhaps overly graphic and crude, these descriptions of pain and foreboding lead us to conclude the National Research Project is a tsunami, not a ripple on the sea,” they wrote.

In its alert to employers the IRS advises companies to plan their response carefully should they receive a letter initiating an audit under the research program. The IRS says companies should form an internal team consisting of representatives from payroll, accounts payable, accounting, human resources, internal auditing, general counsel, and outside tax professionals.