Eight Small Business IRS Tax Audit Areas, to Watch Through 2013

The IRS continually analyzes compliance levels for entities, issues and industries by conducting hundreds of compliance projects and initiatives each year. Leading up to the start of the government’s fiscal year on Oct. 1, the IRS has announced emerging or significant areas that it will prioritize for the coming year. When it comes to compliance, the IRS has increasingly focused on small business under-reporting, which is responsible for 84% of the $450 billion tax gap. At national and regional tax forums held this summer, the IRS projected small business areas where it will focus through 2013. Our next eight posts will be highlighting what the IRS will be focusing on.

First Target Area for IRS Tax Audits:
Fringe benefits, especially personal use of company cars.
The IRS is completing its third and final year of a National Research Project on employment tax compliance. Early findings from these audits indicate that employers are not reporting employees’ personal use of company vehicles on Forms 1099 or W-2. Look for the IRS to investigate the use of all company cars, especially luxury autos, in its audits.

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