Date: September 16, 2021
How you can protect yourself in case of an audit
If you make $200,000 or more per year, your audit risk just went up
The IRS is up to some big changes this year – be on the lookout for an increase in audits for small businesses. Over recent years the IRS is finding it more and more difficult to fill their staffing shortages, resulting in fewer audits being performed. That’s all changing this year. The Biden administration has granted the IRS a substantial budget increase (1.7 Billion more than last year). That means an increase in the number of auditors available to perform audits and collect more from taxpayers. Biden is allocating $40 billion to the IRS over the next decade and expects it to generate an additional $100 billion in revenues (collected from taxpayers).
That doesn’t mean there’s nothing we can do to protect ourselves from the crosshairs of the IRS though! The best thing you can do is to be open and honest with your accountant. Let them know the truth so they can help you. I always tell my clients “this is a judgment-free zone”.
Second is to keep good documentation & accounting records. Follow the tax law and you don’t have to cheat to reduce your taxes. Most of the tax law is incentives to encourage certain behavior – meaning that if we do what they incentivize then we get rewarded for doing so – like when contributing to retirement (or whatever else). So ask yourself – What does the government want me to do? Am I willing to do that? If you’re not even sure what they want, then maybe it’s time for some new accounting help 😉
If you’d like to discuss your potential audit risk and what can be done to reduce it, click here to book a free tax assessment.