What the Formation of the IRS's New Fraud Enforcement Office Means for Small Businesses

On March 5, 2020, the Internal Revenue Service (IRS) announced the creation of a new Fraud Enforcement Office. According to a statement from the IRS, “the new office will reside in the IRS Small Business/Self Employed Division and work on agency-wide compliance issues.” Here, Washington D.C. business tax attorney Kevin E. Thorn explains what this means for small businesses.

The creation of the IRS’s new Fraud Enforcement Office devotes additional agency resources to combatting tax fraud in the small business sector. According to Eric Hylton, Commissioner of the Small Business/Self Employed Division, the Fraud Enforcement Office, “will help strengthen our compliance work and is yet an additional opportunity to engineer partnerships with the tax professionals as well as strengthen our capacity and resolve across all business units with coordinated enforcement efforts.”

What Do Small Businesses Need to Know about the IRS’s Fraud Enforcement Office?

So, in practical terms, what does the creation of the IRS’s new Fraud Enforcement Office mean for small businesses? According to the IRS, the Small Business/Self Employed Division’s mission is to, “help small business and self-employed taxpayers understand and meet their tax obligations, while applying the tax law with integrity and fairness to all.” However, a significant portion of the Division’s efforts are devoted to combatting tax fraud by small businesses. The Fraud Enforcement Office is expected to strengthen the Division’s ability to fight fraud; and, according to Hylton, fighting tax fraud in the small business sector will be one of the Division’s priorities in 2020.

The Small Business/Self Employed Division has oversight of approximately 57 million taxpayers, including about nine million small businesses with assets of less than $10 million. The new Fraud Enforcement Office will assist in the Division’s oversight and enforcement efforts targeting these businesses. In particular, this includes small businesses that have:

• Underreported their federal tax obligations
• Underpaid their federal tax obligations
• Failed to file their federal tax returns

For small businesses, this means that ensuring federal tax filing and payment compliance needs to be a priority. While small businesses should always report and pay their taxes as required by law, the creation of the IRS’s new Fraud Enforcement Office means that small businesses may be at increased risk for tax audits and investigations by the IRS’s Criminal Investigations (CI) division. In addition to working independently, the Fraud Enforcement Office is expected to, “continue to strengthen the internal compliance relationships in the IRS between CI agents and civil-side revenue agents and revenue officers as well as . . . external partners.” As a result, small businesses need to be prepared, and this means gaining a clear understanding of their outstanding federal tax obligations (if any) before the Fraud Enforcement Office comes knocking.

Request an Appointment with a Washington D.C. Business Tax Attorney

If you have questions or concerns about your small business’s federal tax obligations, we encourage you to schedule an appointment with one of our Washington D.C. business tax attorneys. To speak with Attorney Kevin E. Thorn, Managing Partner, Thorn Law Group in confidence, email ket@thornlawgroup.com, call us at 202-349-4033 or inquire online today.