As a small business owner, among the last items you would like to find in your mailbox is a notice from the IRS. And yet, small business owners across the country are going to be receiving exactly those.
As a small business owner, among the last items you would like to find in your mailbox is a notice from the IRS. And yet, small business owners across the country are going to be receiving exactly those.
Why? Because the IRS is beginning to focus even more attention on small business owners in an attempt to extract even more revenue than they already do. Naturally, this IRS scrutiny is going to make it more expensive and more time consuming than ever before for small business owners to comply.
It would seem to be a counterproductive strategy, considering that small businesses are the backbone of the economy. But that’s exactly what the IRS is planning to do – make life more difficult for the already-swamped small business owners here in America. A recent article published on Forbes.com breaks down the situation:
Small business people across America are receiving IRS notices. More will be coming. The IRS gathers data from many third parties—including credit card companies—to see if you picked up every nickel of income.
The IRS is looking at Form 1099 matching—including new merchant reporting of credit cards, mysterious average statistics the IRS uses for comparison and—gulp—cash reporting. Did you remember to record and pay tax on all cash transactions? The controversial IRS notices are titled ‘Notification of Possible Income Reporting.’
Although the IRS says it is just gathering information and not accusing anyone, not everyone is convinced. One Congressman, Sam Graves (R-Mo), Chairman of the House Committee on Small Business, notes that the IRS’s first sentence begins, “Your gross receipts may have been underreported.” Says Congressman Graves, that sounds like the IRS is looking for more than just additional information. It sounds like it could mean more taxes, penalties and interest, Mr. Graves wrote in this letter to the agency.
Mr. Graves suggests that the letters could intimidate businesses. He says that a small business owner receiving this notice may be alarmed and feel threatened. The IRS notice goes on to say your receipts are off from an IRS average. Within 30 days, please provide documentation to prove why your numbers don’t fall within IRS’s standard, the IRS asks.
Yet the IRS doesn’t reveal its source and doesn’t say what the standard is or where it came from. It sounds like you are being asked to prove that you didn’t underreport your income. That’s proving a negative, and could require extensive correspondence and documentation.
Unfortunately, the form of scrutiny discussed in this article is only one example of the hoops that small business owners are forced to jump through each and every year. And it appears that the problem is only going to get worse.
If your small business is facing an IRS dispute, we can help. We know that you have better things to do with your time than deal with the IRS – so we’ll handle the situation for you. If you would like to learn more, please contact us today!