For small business owners in the United States, complying with the federal income tax reporting and payment obligations can be burdensome, but it is also extremely important. The IRS audits countless small businesses every year; and, with the recent formation of the Small Business/Self Employed Division’s Fraud Enforcement Office, small businesses can expect to face enhanced scrutiny in 2020 and beyond.
Is your small business at risk of being audited by the IRS? There are a number of factors that can increase a company’s chances of facing an audit, and there are various issues that can create exposure during the audit process. Here is an overview of five key considerations from US International Tax Advisors:
1. Have You Filed Your Small Business’ Quarterly Estimated Returns?
Small businesses must file quarterly estimated tax returns with the IRS (and their state income tax agencies), and these returns must reflect the current year’s projected tax liability. Failure to file quarterly returns is an issue that frequently leads to IRS audits.
2. Have You Filed Your Small Business’ Annual Income Tax Returns?
From the IRS’ perspective, there is no excuse for a small business failing to file its annual returns. Companies must request extensions if they cannot file on time; and, if they cannot pay what they owe, they must find a way to work with the IRS to avoid steep penalties.
3. Has Your Small Business Fully Paid What It Owes the IRS?
Failing to pay what you owe is almost certain to lead to an IRS audit sooner or later. This is true for both (i) failing to pay the amount of tax stated on your small business’s returns, and (ii) failing to pay additional amounts that the IRS says your business owes.
4. Are There Issues with Your Business’ Books that are Likely to Draw Scrutiny?
During an audit, there are several issues that can draw scrutiny from the IRS’ auditors. Depending on the circumstances involved, these issues can lead to civil or criminal penalties. This includes forms of tax fraud such as:
- Overstating deductions or falsely claiming deductions
- Claiming personal expenses as business expenses
- Making false entries and attempting to hide assets or income
5. What is at Risk if Your Small Business Gets Audited?
If your small business gets audited, what is at stake? Can you afford to pay taxes, interest, and penalties imposed by the IRS? Can you afford to deal with liens, levies and asset seizures? For many small businesses, IRS audits can have severe consequences, and mitigating the risk of these consequences requires a proactive approach based on the advice of an experienced IRS tax attorney.
Request a Consultation with US International Tax Advisors
If you are concerned about your small business’s federal tax liability, or if your company is currently facing an IRS audit, US International Tax Advisors can help. To discuss your situation with US International Tax Advisors, in confidence, call 844-796-8565 or request an appointment online now.
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