The Biden Administration has announced its proposition to hire 87,000 new IRS workers in a move to crack down on those cheating the tax system.
The newly released “tax compliance agenda” is part of a federal plan to bolster enforcement efforts and recover billions of dollars in uncollected tax revenue each year. The Administration has made it clear that enforcement efforts will focus on individuals and corporations with higher incomes and profits, but all taxpayers, particularly small businesses owners, must be aware of this initiative and understand how it affects them.
The IRS has already announced its intention to increase audit activity by 50% in the 2021 tax year. With this information available to the public, small businesses owners should act now, proactively, to keep themselves out of tax trouble and to be prepared in the event of an audit.
Tax experts agree that the Biden Administration's plan will directly affect small business owners who make more than $400,000 a year. Cash-based businesses like restaurants, bars, or salons should expect to be scrutinized as well. But, regardless of economic standing, small businesses need to operate as if an audit could happen tomorrow.
The proposal includes the hiring of agents with sophisticated training in understanding complex tax evasion schemes, meaning even the smallest, unknowing infraction could affect your business. And while you're most likely acting in compliance with tax regulations, the potential headache of a long-lasting and time-consuming federal audit looms.
A small business’s best prevention for tax trouble, an IRS audit, or other collections is pristine bookkeeping.
Small businesses should save receipts for all expenses and keep their books up-to-date to maximize their preparation and/or defense in the event of an IRS audit. Small businesses with “loose” books must take this opportunity to clean them up. A professional bookkeeper does this for you.
Bookkeeping is both a service and a skill, and the IRS expects all businesses, regardless of size, to keep tidy, transparent books. Negligent bookkeeping is a red flag to the agency, and the financial and personal cost of dealing with an IRS agent never amounts to the effort it takes to practice good bookkeeping.
While a less costly do-it-yourself or have-a-family-member-do-it approach to bookkeeping and compliance might be tempting, it is highly inadvisable, especially when the potential for an audit is high.
Partnering with a tax relief professional, one that is an IRS Enrolled Agent with a license to work with the IRS, has never been more important. A tax professional checks your existing documents and compliance and works with you to find tenable solutions to any unintentional shortcomings. In the event of an audit, your tax professional already knows the ins and outs of your business and its activity, and has a response plan ready for the IRS.
Further leverage your tax professional for bookkeeping, other audits, and IRS collection actions. Having a bona fide expert in your corner or on retainer maximizes your chance of a successful resolution.
If you receive notice of an IRS audit, do not panic and don’t assume you’re in trouble. You should call a tax expert immediately and remember to take emotion out of the equation. Your tax relief expert is your partner, and while you have every reason to feel irate or that an audit is unjustified, a tax relief professional works best when an individual is compliant.
The benefits of working with a professional include experience in navigating the complexities of the IRS, their processes, and a familiarity with tax relief programs.
Partnering with a tax expert also gives small business owners the opportunity to focus on their passion instead of tax issues, and leveraging a bookkeeping service preemptively helps you avoid common mistakes that trigger audits, like commingling business and personal expenses or improperly filing a Schedule C.
Tax Relief USA has wide-ranging expertise on filing offers-in-compromise, setting up installment agreements, and navigating the ins and outs of the IRS, audits, and bookkeeping. We work directly with the IRS every day on behalf of our clients, and we’d be happy to work with the IRS for you, so you don’t have to.
If you think you could benefit from a tax relief professional or services, or if you’d like to better understand what the content in this piece means for your small business, please contact Tax Relief USA today for a free tax consultation.