The IRS constantly researches areas it needs to analyze and focus on each year. We are coming up to the start of the government’s fiscal year on October 1st, and the government has already announced areas that it will focus on for the coming year. When it comes to compliance, the IRS has begun to look closely at small business underreporting. Small business underreporting is responsible for 84% of the $450 billion tax gap. Below are some of the major highlights discussed by the IRS at the national and regional tax forum held this summer in regards to small business audits.
Correct work reclassification Business classification can be an important interest to the IRS. The IRS realizes that businesses tend to incorrectly classify workers as independent contractors rather than employees, due to the fact independent contractors can cost about 30% less than an employee.
Extra perks, especially the personal use of company cars – The IRS has noticed that employers are not reporting employee’s use of company vehicles on W-2’s or 1099’s. The IRS is also looking into all company cars especially, luxury autos, in its audits.
High Wealth/High Income Taxpayers – The IRS classifies high wealth/ high income taxpayers as those who have a total positive income of more than $200,000 a year. In 2013 the IRS will focus on taxpayers with a total positive income of more than $1 million who file a schedule C business return in the last year
Matching 1099-K Form – The IRS announced in 2013 that it plans to introduce a business-matching form program that will address a good amount of small business non-compliance.
Small business employee health insurance credit, under Section 45R – This credit became first available in 2010 returns. However, now the IRS will examine small business employers and tax exempts for compliance with Section 45R eligibility requirements.
Transactions being abused, especially international transactions – The IRS is actively looking for taxpayers who hide assets overseas. The IRS will also focus on offshore transactions for small and large businesses.
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