Dear Clients and Friends,
I hope you're having a nice summer so far !
In case you haven't heard, the IRS has announced that they are aggressively hiring "tax enforcement" employees, and this will include their small business unit. In recent years, when auditors left the agency, the IRS has not been replacing them. Now it appears they will be able to expand their audit capacity, and very quickly if Congress passes an infrastructure plan that is currently in the works. Their goal is to increase tax audits by 50% in 2021 !
We in the CPA community wish they would focus more on the customer service side of the things. Currently, we can rarely get anyone on the phone to assist us with helping our clients resolve tax notices or other issues. There simply are not enough agents to handle all of the extra work created by the numerous complicated changes that the 2020 tax year brought.
In the meantime, as we see how this unfolds, some tips to stay out of trouble:
- ensure all 1099 income is captured (the IRS gets copies of all 1099s)
- don't claim losses on activities that are really hobbies
- don't go crazy with home office deductions
- don't go crazy with auto deductions
- keep your business and personal accounts separate
- ensure you can substantiate all of your deductions
Have a great July 4th weekend....it is sure to be better than last year !