Yes, it’s true. The IRS plans to increase its audits of smaller businesses and their investors. And yes, the audits come on top of a year of pandemic-related tax changes. My advice: instead of panicking, put a solid plan in place to eliminate mistakes and be prepared for a review.
The expected surge in audits will focus on small businesses including mom-and-pop retailers, online start-ups, and investment funds. Pass-through entities, including partnerships, limited liability companies, sole-proprietorships, and S corporations, will also be targeted.
Here are a few tips to help safeguard your business interests and avoid an audit:
Last year brought a multitude of tax changes for small businesses, including the Families First Coronavirus Response Act, the Cares Act, and the government funding bill passed in December. Many of the changes overlap. Because of this, navigating the U.S. tax code will be more challenging in 2021.
The bottom line: I admit, it’s hard not to feel a little queasy. But please don’t panic. It’s time to get all your ducks in a row. With proper planning and help from your accounting professional, you can avoid audit risks and get back to running your business. I hope this post inspires you to get your tax records in order and meet with your accounting professional as soon as you can.
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IRS Expected to Audit More Small Businesses in 2021
The IRS Plans to Audit More Small Businesses This Year