The government is focused on narrowing budget gaps and trying to find revenue from wherever it can. In recent years, the IRS has set its sights on small business and upped S-Corporation audits believing there was a good chance to collect on their non-tax compliance. However, a Reuters article titled Small business audits often find no more taxes due-IRS watchdog reports that IRS watchdog, Russell George criticized the high number of “S-corporation” audits that did not yield additional taxes owed. George also suggests this agency practice “is spending a significant amount of resources on unproductive audits.”
George, who is the Treasury Inspector General for Tax Administration or TIGTA, claims that his TIGTA unit found that more than 98 percent of all S-corps have $10 million or less in assets. A sampling of businesses this size for fiscal year ending September 30 revealed 62% of S-Corp completed audits “without any recommendation of tax changes.”
An IRS audit increase could be due to the popularity of the S-corp. According to Reuters, IRS figures show S-corp tax returns surging and estimates there will be 5.7 million returns in 2015, up 26 percent from 2011 even as C-corp returns have dropped sharply. This flow through business structure allows company profits to go directly to shareholders to report on their individual tax return. These profits are not subject to the taxes (over 15%) that relate to employment such as FICA, unemployment taxes or workers compensation insurance.
For small business owners and individuals alike, this latest IRS watchdog report is a cautionary tale to avoid an IRS audit at all costs. The IRS is one of the most brutal collection agencies on the planet, if facing a tax audit of any kind, don’t go it alone – hire an certified tax resolution specialist to provide some IRS tax relief.
Here are some things that can (and do) happen if client decides to represent themselves in an IRS audit:
- They talk too much in an audit and incriminate themselves by divulging too much information and create more tax problems in the process.
- They raise IRS red flags by not telling the truth or answering questions truthfully during their audit. The auditor across the table wonders what else is being hidden and decides to dig deeper into their tax issue.
- No representation = no advocate to provide tax help to ensure a taxpayer’s rights are being protected.
- They do not understand how all the information provided to the IRS will be used in their case. Therefore, errors and incorrect information can go un-checked.
A qualified tax professional or tax attorney with experience handling IRS audits on your team can help you reduce back taxes, IRS penalties and interest and ensure (in most cases) you will not have to meet with an IRS auditor.
More Tax Help, IRS News and Tax Relief Tips:
- Michael Rozbruch Interviewed in Opportunist Magazine
- New Offer in Compromise Policies Bring Tax Relief
- Tax Resolution Expert-Five Reasons to Hire One
- Tax Expert-Hiring a Tax Professional on Fox News
- IRS Offers Tax Help Tips-Worker Classification