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IRS Focus Areas this Tax Season

As you prepare your individual or business tax return extension, place extra attention on issues the IRS is monitoring closely this year.

The frequency of IRS audits slowed in recent years, but taxpayers’ mailboxes continue to receive correspondence inquiries. Often, agents either can’t match the amounts on your return with their database or your reported amount appears outside the norm for your type or size of business.

We see continued emphasis on:

  • Travel and entertainment,
  • Auto expenses,
  • Matching of information documents,
  • Miscellaneous and other expenses, and
  • Shareholder salaries, particularly for S-corporations.

Documentation is critical, so maintain your receipts and the notation of who, when, where, why and how much in these areas.

“Reasonable compensation” is expected for your position and the level of the business you own. Red flags result from a small salary combined with material shareholder distributions. The IRS will likely assess payroll taxes on the distributions and add them to your salary deduction.

We also expect an increased spotlight on the justification for payees considered independent contractors.

All of these requirements may seem overwhelming, so if you need further explanation or help with other filing issues, the tax accountant team at Patrick & Robinson CPAs can help. Contact us at (904) 396-5400 or Office@CPAsite.com.

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