IRS IS PLANNING MORE AUDITS FOR HIGH-INCOME
FILERS, THE SELF-EMPLOYED AND S-CORPS-ARE YOU PREPARED?
The IRS estimates it is loosing billions each year to underreported
income and overstated deductions. As a result, they are increasing
their audits. The focus will be on filers with over $100,000 in
income, self-employed businesses and S corporations. The IRS intends
to continue to increase the percentage of returns it audits each
year for years to come based on the findings of its audits.
The IRS is looking at ways to obtain more information on income
by requiring more reporting on Form 1099. Currently, if an entity
pays an individual or sole proprietor $600 or more, they are required
to report the amount paid on form 1099. The IRS wants to change
the requirement to include credit card firms to file on merchants
and include reporting of payments to small corporations with fewer
than 50 employees. Although this would help the IRS in determining
income actually received, it would increase the burden on companies
considerably. This would require Congress to approve these changes.
The IRS is also planning more line-by-line exams. This type of exam
requires support for each line item you have on your tax return.
The focus is on individuals and S Corporations at this time and
will be expanded to include partnerships and exempt groups in the
future. If you ensure that your accounting supports the tax return
and you have a good audit trail from your original document to your
accounting entries, you should be able to provide the IRS with what
they need in case you are chosen for one of these audits.
The IRS is also looking at using leads provided by state audits
to determine if there may be additional money owed to the IRS. This
would require little effort on their part since the work has already
been done by the state.
The IRS is going after tax revenue in a more aggressive fashion
than it has in the past. In order to ensure that you are ready,
you should make sure you have a system that allows you to have a
trail from the original document to the accounting entry and then
ultimately to the tax return. If your company needs help in setting
up procedures and a system in order to ensure that you have an adequate
trail in case you are audited, feel free to contact me to find out
what your company may need.
Look for more articles in the future about forensic, accounting
and tax issues. You can get RSS feed updates on the web site at
RSS Feed.
Dianne Goodman, a CPA and Forensic CPA, and her company Comprehensive
Small Business Solutions, PC, provides forensic, accounting and
tax services located in Albuquerque, New Mexico, working in conjunction
with lawyers, government entities and the business community. The
type of services offered in addition to tax and accounting services
include analyzing financial business related issues, divorce disputes,
employee theft, evaluating internal procedures for effectiveness
and suggesting possible courses of action for prevention of future
occurrences and creation of databases and preparing and disbursing
settlement proceeds to various classes of victims.
This article was intended to provide general information about IRS
audits. It does not contain all the rules and issues that may apply.
If you have further questions, I can be reached via E-mail.
About the Author
Dianne
Goodman, CPA, FCPA - Specializes in servicing Small Businesses
and Individuals. Visit www.diannegoodman.com
for relevant and current information on a variety of financial
and tax issues focusing on small businesses and individuals or call
at 1-888-851-1975.
CONTACT INFORMATION:
Dianne
Goodman, CPA, FCPA
Comprehensive Small Business Solutions, PC
505 323-2307
1 888-851-1975 toll free
www.diannegoodman.com
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