IRS is Targeting Small Businesses for Tax Audits

November 29, 2012 (Press-News.org) IRS is targeting small businesses for tax audits

As a small business owner, the last thing you want is to receive a notice from the Internal Revenue Service that says you are being audited. Unfortunately, the IRS has announced that they are going to be taking a closer look at small business tax returns. According to its records, the IRS blames small businesses for 84 percent of the $450 billion tax gap.

Eight tax audit areas to be aware of

To curb underreporting, the IRS has announced eight important audit areas for small businesses for 2012 and 2013. Those areas include:
-Employeeperks. The IRS will be taking a closer look at fringe benefits and especially the personal use of company vehicles in its audits.
-Highincometaxpayers. High income is another issue the IRS looks for in determining its audits. The higher the income, the more likely an audit. The IRS defines high income taxpayers as those who bring in more than $200,000 a year.
-Form 1099-K matching. The IRS will start taking a closer look at credit card money earned in 2013. Business will receive a 1099-K that will report the actual money earned from credit cards and other merchant services. The IRS will be matching the 1099-K to the small business' tax return to ensure all credit card monies are being reported.
-Small business health insurance. The IRS will be scrutinizing eligibility requirements for the small business health insurance credit.
-International transactions. International transactions are always a red flag for the IRS; it intends to continue to pursue taxpayers who hide income and assets abroad.
-Partnerships. The IRS will be investigating partnership returns and intends to target partnerships who claim a large loss on their returns.
-S corporations. The IRS will be investigating S Corporation distributions and looking for companies who use the S Corp. structure to avoid payment of Social Security taxes.
-Proper worker reclassification. IRS will be focusing on the classification of workers. It costs less to employ an independent contractor than an employee because employers don't have to paying payroll taxes, which includes income, social security, and Medicare taxes, on independent contractors. Misclassifying these workers to avoid the taxes is a big area of audit.

Contact anexperienced tax attorney

An IRS audit is done to determine the accuracy of your tax return. If you or your small business is audited, you will need to substantiate your income, deductions and credits on your return. Without proof, you could find yourself and your business in trouble. The technicalities and overall complexity of taxation are not something to handle on your own. Contact an experienced tax attorney in your area to help you through your small business audit.

Article provided by Hider & Associates, P.C.
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