8 Invitations to an IRS Audit# ebiz - 电子商务
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Internal Revenue Agent
Agents of the Abusive Transactions Group will be conducting examinations
of individuals, sole proprietorships, small corporations, partnerships
and fiduciaries.
This group specifically goes after taxpayers who generally have higher
incomes than most taxpayers, need to file more tax forms, and generally
need to rely more on paid tax preparers.
But even if you aren’t wealthy, don’t operate a cash business, and you
don’t have a CPA filing reams of forms for you, you still can easily
become an IRS target.
Twice as many tax returns were audited in 2009 as 2000. Enforcement
revenue over the same period was up 50 percent.
It’s important to note that in this land of equality, not all
individuals or companies are treated equally when it comes their chances
of an audit. About one in a hundred businesses with less than $10
million in assets is audited. That number jumps to 10 in a hundred for
those with $10-$50 million in assets, and one in four for businesses
with assets greater than $250 million.
Certain industries are scrutinized more heavily too. You can probably
guess some of them—cash businesses are always high on the IRS hit list.
But would you suspect Dr. Doggie, the vet, is a target too? It turns out
the IRS has a special auditor guidebooks for veterinarians, and for
ministers, laundromats, car dealers and many others too. Their Retailer
Guide offers specific strategies for interrogating e-commerce
businesses, gas stations, direct sellers, mobile food vendors, pizza
shops and the like.
You can read all about how auditors are instructed to look for tax
cheats in these publicly available guides. They’re not easy reading like
a John Grisham novel, but they will make the hair on your neck stand on
end.
Here are some "red flags" that commonly trigger an audit:
1. Math Errors
While an error in basic math might not instigate a full blown line-item
audit, it’s the most common reason Americans receive those heart-attack
inducing letters from their friendly local IRS office. Use a calculator
and check your numbers twice.
2. Unusually High Itemized Deductions
The IRS uses a very secret formula to calculate what your deductions
should be. If computer scan of your returns shows that your deductions
for charity, travel and entertainment, and healthcare are out of line
with your income, you’ll be on their radar.
3. Self-Employed/Schedule C Filers
Small businesses are suspected of being especially creative with their
expenses. Be careful if you take a home office deduction, have lost
money for several years in a row, and prepare your returns yourself
rather than use an accountant.
4. Lots of 1099s
In February of 2010, in hopes of adding billions to depleted U.S.
Treasury coffers, the IRS began a three-year initiative to crack down on
what they believe to be a common practice of misclassifying employees as
contractors.
Six thousand businesses have already been targeted for audit, and the
government hopes to hire 100 new Department of Labor employees
specifically to police these abuses. And yes, the do share their
successes with the IRS and State authorities.
5. Unreported Income
Be especially careful to report all your income. If you’ve received a
1099, so has the IRS and their computers will notice if they don’t match
up.
The same is true for other sources of income. If your former spouse
reports alimony paid and you don’t report receiving it, you’ve just
painted a big bull’s-eye on your tax return.
6. Previously Audited
If you’ve been audited in the past don’t think you’re off the hook—
especially if you owed taxes or fines. The IRS knows people have the
mistaken impression that the auditor won’t come knocking twice. But, of
course, just the opposite is true.
7. Shareholder
If you are an investor in a partnership or corporation that came under
the gimlet eye of the Feds, you may be next in line.
8. Pissed Someone Off
Disgruntled former employees are a regular source of IRS tips. But
payback isn’t the only reason people go the IRS—the agency is authorized
by law to pay rewards to informants. In cases that involve huge amounts
of money, the informant’s cut can be as high as 30 percent of what they
collect.
Make no mistake, your IRS auditor won’t be jolly.
Agents of the Abusive Transactions Group will be conducting examinations
of individuals, sole proprietorships, small corporations, partnerships
and fiduciaries.
This group specifically goes after taxpayers who generally have higher
incomes than most taxpayers, need to file more tax forms, and generally
need to rely more on paid tax preparers.
But even if you aren’t wealthy, don’t operate a cash business, and you
don’t have a CPA filing reams of forms for you, you still can easily
become an IRS target.
Twice as many tax returns were audited in 2009 as 2000. Enforcement
revenue over the same period was up 50 percent.
It’s important to note that in this land of equality, not all
individuals or companies are treated equally when it comes their chances
of an audit. About one in a hundred businesses with less than $10
million in assets is audited. That number jumps to 10 in a hundred for
those with $10-$50 million in assets, and one in four for businesses
with assets greater than $250 million.
Certain industries are scrutinized more heavily too. You can probably
guess some of them—cash businesses are always high on the IRS hit list.
But would you suspect Dr. Doggie, the vet, is a target too? It turns out
the IRS has a special auditor guidebooks for veterinarians, and for
ministers, laundromats, car dealers and many others too. Their Retailer
Guide offers specific strategies for interrogating e-commerce
businesses, gas stations, direct sellers, mobile food vendors, pizza
shops and the like.
You can read all about how auditors are instructed to look for tax
cheats in these publicly available guides. They’re not easy reading like
a John Grisham novel, but they will make the hair on your neck stand on
end.
Here are some "red flags" that commonly trigger an audit:
1. Math Errors
While an error in basic math might not instigate a full blown line-item
audit, it’s the most common reason Americans receive those heart-attack
inducing letters from their friendly local IRS office. Use a calculator
and check your numbers twice.
2. Unusually High Itemized Deductions
The IRS uses a very secret formula to calculate what your deductions
should be. If computer scan of your returns shows that your deductions
for charity, travel and entertainment, and healthcare are out of line
with your income, you’ll be on their radar.
3. Self-Employed/Schedule C Filers
Small businesses are suspected of being especially creative with their
expenses. Be careful if you take a home office deduction, have lost
money for several years in a row, and prepare your returns yourself
rather than use an accountant.
4. Lots of 1099s
In February of 2010, in hopes of adding billions to depleted U.S.
Treasury coffers, the IRS began a three-year initiative to crack down on
what they believe to be a common practice of misclassifying employees as
contractors.
Six thousand businesses have already been targeted for audit, and the
government hopes to hire 100 new Department of Labor employees
specifically to police these abuses. And yes, the do share their
successes with the IRS and State authorities.
5. Unreported Income
Be especially careful to report all your income. If you’ve received a
1099, so has the IRS and their computers will notice if they don’t match
up.
The same is true for other sources of income. If your former spouse
reports alimony paid and you don’t report receiving it, you’ve just
painted a big bull’s-eye on your tax return.
6. Previously Audited
If you’ve been audited in the past don’t think you’re off the hook—
especially if you owed taxes or fines. The IRS knows people have the
mistaken impression that the auditor won’t come knocking twice. But, of
course, just the opposite is true.
7. Shareholder
If you are an investor in a partnership or corporation that came under
the gimlet eye of the Feds, you may be next in line.
8. Pissed Someone Off
Disgruntled former employees are a regular source of IRS tips. But
payback isn’t the only reason people go the IRS—the agency is authorized
by law to pay rewards to informants. In cases that involve huge amounts
of money, the informant’s cut can be as high as 30 percent of what they
collect.
Make no mistake, your IRS auditor won’t be jolly.