2020 came with many troubles for small business owners. 2021 may complicate things further since the Internal Revenue Service intends to increase the number of audits. Texas small business entrepreneurs who previously did not worry about audits may soon find themselves responding to agency queries.
Reports of increased audits
News now circulates that the IRS will increase small business audits by 50% over 2020 numbers. LLCs might experience even greater scrutiny, which might concern those running such enterprises. The IRS even plans to hire more auditors to address the increased number of tax audits in 2021.
Small business owners might need to prepare for a potential audit. There might be nothing wrong with the return, but the return may end up flagged for a review. Properly organizing records could help the process if chosen for an audit.
Dealing with an IRS audit
An audit could involve little more than responding to a written examination. The Internal Revenue Service could send a notice challenging a particular deduction. For example, the agency might question whether a business deduction is, in actuality, a personal deduction. Providing the necessary proof that the deduction is valid could address the agency’s concerns.
Responses to IRS inquiries require professionalism and timeliness to increase the chances of a desirable outcome. Providing an insufficient response might lead to the assessment of additional tax. Collection action might commence soon afterward.
Appeals with the IRS may be possible when the taxpayer doesn’t agree with an audit’s outcome. Sometimes, the taxpayer’s insufficient attempts to handle the audit on his or her own contributed to an assessment.
An attorney may help those struggling with tax issues and audits. An attorney could discuss options for an IRS audit defense and appeals. The attorney might even represent a client before the IRS.