Washington D.C. Small Business Tax Matters and Small Business Audit Lawyers
Experienced Tax Counsel for Small Businesses Facing IRS Audits and Other Tax Issues
The Internal Revenue Service (IRS) has enhanced its efforts to enforce small businesses’ tax obligations in recent years. The IRS’ Small Business/Self-Employed Division focuses exclusively on targeting small businesses and business owners; and, while its jurisdiction extends to businesses with up to $10 million in assets, it regularly audits and investigates businesses and self-employed individuals that have far less at stake.
But, even if your small business isn’t worth millions, facing scrutiny from the IRS can still have significant—if not business-threatening—implications. IRS audits can lead to substantial liability for back taxes, interest and penalties, while federal tax fraud investigations can put business owners at risk for criminal prosecution. As a result, small business owners need to make tax compliance a priority, and they need to engage a Washington DC small business tax lawyer promptly after being contacted by the IRS.
About the IRS’ Small Business/Self-Employed Division
The IRS’ Small Business/Self-Employed Division exists to “[h]elp small business and self-employed taxpayers understand and meet their tax obligations while applying the tax law with integrity and fairness to all.” To achieve its mission, the Small Business/Self-Employed Division focuses on compliance in three primary areas:
- Small Business Underreporting – The Small Business/Self-Employed Division devotes a significant portion of its resources to targeting small businesses and business owners suspected of underreporting their federal income and employment tax liability. This includes misstating business income, misstating employment tax liability, and fraudulently claiming credits and deductions.
- Small Business Underpayment – In addition to targeting underreporting, the Small Business/Self-Employed Division also targets underpayment. Again, this includes both income and employment tax, and it involves targeting small businesses and their owners for a variety of specific tax law violations.
- Small Business Non-Filing – The IRS is also prioritizing enforcement against non-filers. The IRS is able to identify small businesses that have failed to file tax returns through various means, from examining other taxpayers’ returns to reviewing reports from financial institutions and other third parties.
Within the Small Business/Self-Employed Division, the Examination Division focuses on uncovering underreporting and non-filing through correspondence, office, and field audits. The Collection Division focuses on enforcing small businesses’ income and employment tax payment obligations—and it does so through “the use of enforcement tools when appropriate.”
Common Small Business Tax Issues
Within its three areas of focus—underreporting, underpayment, and non-filing—the IRS’ Small Business/Self-Employed Division targets a variety of specific violations of the Internal Revenue Code and other applicable laws. Small businesses and their owners must be careful to avoid issues that have the potential to trigger IRS scrutiny, and they must be prepared to defend against IRS audits when necessary. Some of the most common small business tax issues that trigger IRS audits include:
- Failing to properly withhold and remit federal employment taxes
- Failing to report foreign income or assets as required under the Bank Secrecy Act and Foreign Account Tax Compliance Act (FATCA)
- Improperly claiming business expense deductions (i.e., claiming deductions for personal expenses paid with company accounts)
- Improperly classifying employees as independent contractors
- Improperly claiming credits and exemptions (i.e., the employee retention credit or PPP loan forgiveness)
- Underreporting business income (i.e., failing to report cash receipts or properly account for cryptocurrency payments)
- Utilizing abusive tax structures and shelters to illegally evade federal income tax liability
These federal tax law violations (among many others) all present unique risks, and they all require a unique defense strategy during IRS small business audits. For small businesses, ensuring comprehensive tax law compliance is paramount, and small businesses must be prepared to affirmatively demonstrate compliance when necessary.
Our Tax Law Services for Small Businesses
We provide comprehensive tax advice and representation for small businesses in Washington D.C. Whether you have questions about maintaining federal tax compliance or your small business is under scrutiny from the IRS, our Washington DC small business tax lawyer can help you make the right decisions to protect your business. Our tax law services for small businesses include:
- Tax Counseling – We work with numerous small businesses to help them legally minimize their federal tax liability through strategic planning. If you have questions about what you can (and should) be doing to avoid paying more than necessary, we can help.
- Correcting and Self-Reporting Tax Law Violations – In most cases, proactively addressing tax law violations will minimize the risks involved. If your small business has underreported or underpaid its federal tax liability, we can help you choose the best path forward, whether that involves filing an amended return, making a streamlined filing, or submitting a voluntary disclosure.
- IRS Audit Defense – IRS audits can lead to substantial liability for small businesses and their owners. If the IRS is looking into your business tax filings, we can use our experience to help steer the IRS’ inquiry toward a favorable resolution.
What To Do When Facing an IRS Small Business Audit
Let’s say the IRS is auditing your small business’s tax returns. What should you do? Once you find out that the IRS is examining your small business’s filing history, there are some steps you should take promptly. These steps include (but are not limited to):
- Preserve all relevant records (so that the IRS cannot accuse you of obstructing its audit);
- Collect all relevant records to discuss with your small business’s tax counsel;
- Ensure that you are aware of any deadlines that apply (as identified in the audit letter or any other documentation you may have received from the IRS);
- Instruct your small business’s personnel not to engage with the IRS directly unless specifically advised otherwise; and,
- Engage experienced tax counsel to advise you and deal with the IRS on your behalf.
Request an Appointment With One of Our Washington DC IRS Small Business Audit Lawyers Today
If you need a Washington DC small business tax lawyer in Washington D.C., we encourage you to contact us promptly. We can help you understand your situation, make informed decisions and avoid unnecessary liability to the IRS. To schedule a confidential consultation as soon as possible, call 202-349-4033, email ket@thornlawgroup.com or tell us how we can help online today.
