IRS to Audit More Wealthy Small Business Owners: Are You at Risk?
Audits can be frustrating, but for the average taxpayer, the likelihood of dealing with them is relatively small. As income increases, however, audits become more likely. This is an especially noteworthy concern for small business owners, as entrepreneurship delivers an increased audit risk even when profits are low.
This risk may increase in the near future, as efforts to fight tax evasion among wealthy Americans will be central to President Biden’s $80 billion IRS plan. How will this impact your business? Keep reading to find out:
Why the IRS Is Making Changes
For the last several years, the IRS has dealt with a perpetual backlog while also conducting fewer audits. Staffing issues may be, in part, to blame for both concerns. As a result, many high-income taxpayers are able to evade their liabilities without suffering any consequences. The IRS hopes to change that as it receives the funding needed to fuel additional audits.
IRS Commissioner Chuck Rettig explains, “A robust and sustained investment in the IRS is necessary to ensure it can do its job of administering a fair and effective tax system.”
Are Small Business Owners Vulnerable?
Commissioner Rettig hopes that technological updates and other changes at the IRS will help the agency catch the most “egregious offenders while helping compliant taxpayers avoid unnecessary and costly audits.”
Despite this, skeptics worry that high-earning small business owners will be the first to suffer. Cash-only businesses, in particular, are expected to receive more attention from the agency in the near future. This could be a huge problem for service-based industries such as hospitality and retail.
Do you suspect that you are at a heightened risk of being audited? Or are you currently dealing with an audit? The team at the Highland Tax Group can help. Contact us at your earliest convenience to learn more about our audit representation services.