IRS is Determined to Increase Small Business Audits by 50% in 2021
IRS Deputy Commissioner Lough shared on the IRS website that audit numbers will drastically increase in 2021. What this means for taxpayers is that as we adjust to the “new normal” and income increases, audit risk will increase as well.
More recently, IRS Deputy Commissioner De Lon Harris stated that the IRS is hiring 50 more specialized auditors by February in order to “increase compliance activity.”
Thousands of businesses, big and small, didn’t survive the global pandemic of 2020. It seems everyone was naively under the impression that 2021 would be a significant upgrade – provide us all with a comeback year. The IRS didn’t hesitate to burst our bubble with their announcement of the audit increase that they’re determined to see come to fruition.
How will the audit increase affect Americans with back taxes?
Owing back taxes is already a proverbial thorn in the side and mind of every hardworking American subjected to IRS collection actions. With 20.5 million job losses in April 2020 alone, it’s safe to say that more people will include deductions that they normally wouldn’t when they file in 2021.
The rise in audits leaves no room for mistakes in the upcoming tax season. The lower and upper class are already audited significantly more than the middle class due to the misuse of deductions and tax credit. While not always done purposely, it does lead to owing back taxes after an audit.
Consider that fewer partnership businesses filed in 2020 due to the pandemic. If you were unable to file and pay taxes in 2020, then you already owe the IRS. Tax experts predict that with the audit increase, more people will owe back taxes in 2021 than in 2020.
What to do if you’re audited
During an audit, you shouldn’t make any changes to your taxes or try and correct your mistakes until after the audit is over. Otherwise, you can cause more harm than it’s worth and dig yourself into an even deeper hole with the IRS.
Instead, calmly gather any receipts and bank statements you may have. If you find it difficult to accumulate all of the receipts and statements that the IRS is asking of you, it is in your best interest to hire a tax professional. They can help with accessing records that can build up your case.
Click here to speak with a tax professional.
What to do if you owe back taxes after an audit
When you owe more than you could possibly pay in back taxes, there are relief options available to you. The Fresh Start Initiative, for example, is a federal program that assists taxpayers with debt that they couldn’t possibly pay off.
Fresh Start has a simple eligibility process and can reduce tax debt or stop collections altogether. It works especially well when paired with a tax professional to assist with IRS negotiations.
How to qualify and take advantage of Fresh Start
You can fully utilize the Fresh Start Program in the following steps:
- Click here to start your eligibility process
- Connect with a tax professional to discuss your case
- Start negotiations with the IRS