According Business Week online, the IRS is amping up its focus on auditing small businesses, over and above the usual rate of audits system-wide ("The IRS Sets Its Sights on Small-Biz").
Everson, who’s serving a five-year term, says cracking down on small
businesses now will minimize the national deficit and avoid an eventual
tax increase.
I’m on the fence about this. On one-hand, the "little guy" shouldn’t get away with tax evasion just because he thinks he will escape notice. On the other hand, "avoiding an eventual tax increase" is a great rallying-cry, but the cost of these audits on thousands of "little guys" will eat up quite a bit of the recovered monies. (whoops….just noticed they said that further down in the article — it’s stil true, though!)
"Pressure is being applied to find the money that they claim is there,
but what if it isn’t there? Think of the pressure which that puts on
the IRS to get tougher. You don’t want to be the person that gets
audited the day after that message goes out. It’s like saying ‘We
couldn’t find a problem, so find one,’" says Paul Hense, a certified
public accountant and chair of the NSBA.
I’ve always wondered about this phenomenom, but I think it’s just luck of the draw. As they point out in another part of the article, the key is not to apply pressure to find what isn’t there. Instead, the push should be to better qualify the audit targets before the audit is done.
In any case, it’s always scary hearing about the IRS on the warpath (or even politely knocking at your door). It’s just another reason to keep your nose clean and be best buddies with your very competent accountant.
