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IRS Estimates the Tax Gap Totals Hundreds of $$BILLIONS

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If you are a small business owner, and you have never experienced an IRS audit, consider yourself fortunate. Be aware though, the Biden team is proposing $80 billion in new IRS enforcement funding to close the so-called tax gap.

 

How this may affect your business

IRS research estimates the “tax gap” (the difference between the amount of tax owed and the amount of tax reported and paid) totals hundreds of $$BILLIONS. In President Biden’s address to a joint session of Congress on April 28th, the President spoke of increased funding for the IRS to improve compliance.

Who is in his Bull’s Eye?

  • Pass-through entities (S corporations and partnerships)

  • Cash-based businesses

  • Taxing overseas income and assets

  • Those who earn over $400,000

  • Big corporations

Besides hiring auditors, the IRS wants to exponentially increase required information reporting. What are some examples of how the IRS plans to harvest and use data?

The IRS wants …

  • banks to report how much money went in and out of your accounts

  • to eliminate cash

  • more data from major software vendors like QuickBooks. That will enable the IRS to spot missing revenue in business tax returns using artificial intelligence.

Those are but a few examples of the coming changes. Whether or not you agree that small business owners constitute the largest portion of the tax gap, you can expect an increase in penalty notices, IRS letters and inquiries, audits, and information requests.

The laws have not yet been changed and the funding has not yet happened. And you might think those things won’t happen, after all, both Democrats and Republicans have donors who meet the bulleted criteria. Those donors will stop the changes. You may be right. The changes may not happen. But if they do, we can help.

We know what the IRS is looking for, and we will work with you to help make your tax returns accurate enough to help reduce the chances of an audit.

If you are not already taking advantage of our Audit Protection Plan, talk to us about how to sign up for this more-valuable-than-ever service BEFORE a letter from the IRS shows up in your mail.

 

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