An expert recently testified before a house sub-committee documenting the fact that the IRS is targeting small business owners for audit in disproportionate numbers. The IRS allegedly believes many small businesses receive much of their income in cash which is hard to track. The IRS would obviously usually make more money auditing larger corporations, however they are targeting small and mid-size companies more aggressively in 2016.
Citing 2014 examples the expert noted: “The highest number of audits for 2014 of individual tax returns with business income was in the lowest range of business returns, i.e. $200,000 to $400,000, amounting to 50 percent of all audits of upper income individual returns. Indeed, the chances of a Schedule C being audited are almost twice as great as a small corporation being audited.”
IRS audits are not random. The IRS is targeting small business owners for audit because their internal algorithm has determined these returns have a higher percentage of unreported income and unpaid taxes. Many of these small business owners attempt to face the IRS without representation – compounding the risk they face an ultimately substantially increasing the amount of the check they write to the IRS at the end of the audit. After decades of experience representing individuals and small to mid-size business owners in IRS audits I can tell you the amount they pay for representation is almost always far less than what the IRS was targeting at the onset of the audit. The IRS tax audit attorneys at Allen Barron can protect you from aggressive auditors, reducing your exposure and preventing “audit-creep” – a tactic IRS revenue officers use to expand the scope of the audit and the amount you will ultimately owe at the end of it.
If you have been contacted by the IRS for an audit it is not in your best interest to contact or communicate directly with the IRS. We invite you to download “What to Expect from an IRS Audit” and learn about the process you will face and the specific strategies you can employ to reduce your risks and the amount your will pay. We invite you to contact us for a free consultation at 866-631-3470. Ask about the protections of the attorney-client privilege.