Who's Afraid Of The IRS?

Who's Afraid Of The IRS?

An updated and streamlined tax agency looks to catch more tax offenders. Financial writer Mark E. Battersby shares how to best avoid an audit.

October 15, 2018

One of the more nerve-wracking aspects of taxes for many snow and ice management contractors and business owners is the possibility of being audited. Surprisingly, the IRS’s own figures reveal that, in general, only 1 or 2 percent of all taxpayers actually have their returns audited each year.

However, once a large and inefficient federal bureaucracy, the IRS is changing to become more streamlined and, most importantly, catching more tax offenders. The IRS enforces the tax law in a number of ways; the more common methods include correspondence (examination by mail) and field (face-to-face audit) examinations.

According to the latest figures, the IRS audited almost 1.1 million tax returns, approximately 0.5 percent of all returns filed in 2016. The majority of audits conducted during 2017, 70.8 percent, were via correspondence. The remaining 29.2 percent were field audits. Of the more than 1.1 million audits, almost 34,000 resulted in additional refunds totaling more than $6.6 billion.

Agents in back offices are being replaced by computers with complex algorithms that cast a wide net, one that pulls many law-abiding citizens into the chaos of an audit. The result is that many seasonal and, often cash-basis, snow removal businesses are being scrutinized far more often than the numbers indicate.

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