IRS announces more audits for Small Business:
Just when you thought it was bad… The IRS has officially announced that it will increase the audit of small businesses by 50%. The IRS is hiring more auditors and more experienced auditors as well. While this sounds horrible don’t hit the panic button just yet. The starting point is extremely low. Of the roughly 4 million partnership returns filed in 2018 the IRS audited 140, less than 0.00004% (according to the more data from the IRS). This was actually a decrease from the number that was audited in 2010 for partnerships. Regarding S-Corps, in 2018 roughly .01% were audited. Regardless no one wants to be in that small number, so make sure to safeguard your business interest and avoid this worst case scenario with the following tips:
- Use a professional who knows the intricacies of the tax code
- Make sure you have clear and adequate documentation in a concise manner, preferably in a digital format
- Make estimated tax payments – if you owe more than $500 in taxes for your business entity, you should be evaluating your tax liability quarterly and making estimated tax payments accordingly
- If you have any questions ask and keep asking until you are satisfied
- If you are using a tax preparer who does not sign your tax return this is a problem; if they make you sign as self-prepared this is a problem