The IRS has recently announced it is stepping up the examination and auditing of tax returns in an effort to increase compliance as well as tighten the multi-billion dollar â€œTax Gap.â€
High on the list of growing IRS audits will be self employed taxpayers who file a Schedule C (Form 1040) with their tax return. IRS estimates range from at least a 50% to a 74% increase in these taxpayer audits.Â Some of the examination issues include unreported income, particularly for a small business with large cash volume, issues surrounding expense deductions, payments for independent contractors, mileage deductions, or expenses that may be personal in nature versus legitimate business expenses.
Another target for examination and audit is the S Corporation. Issues include reasonable salary, losses in excess of the basis in stock, accountable reimbursements paid under a plan and corporate compliance.Â The IRS will be paying special attention to the business record-keeping practices for sole proprietors and all entities.
If the IRS comes knocking at your door (which usually happens on a Friday) feel free to give the us a call.Â I’ll be glad to answer your questions personally!
619 – 283-8055