IRS Increases Industry Specific Audits

By September 26, 2011 Businesses

The IRS is continuing to step up the number of audits and enforcement of tax laws. If you receive a scary letter from the IRS, or worse yet, if an agent shows up at your home or place of business, don’t panic. It may be the case that you have done nothing wrong. However, it could mean you have been selected for a random or industry specific audit (not quite as fun as the publishers clearing house guy with the oversized check). If you become confused by the accounting language contained in the notice or just want to double check that you are responding properly, please contact our office we would be glad to help. Also, keep your eye on the “Compliance” section of our blog for information on industries the IRS is looking closely at and what they are looking for. The IRS Has New Tax Examination Guidance for the following industries.

1) If you have an indoor tanning salon and are offering “free tanning” to avoid the 10% excise tax. Beware, the IRS is looking into tanning companies to determine if tanning services are actually being offered at no cost or are simply an attempt to avoid the 10% excise tax.

2) Fisherman: IRS Agents are looking very closely at meals & entertainment as well as travel expenses to determine if the deductions are personal in nature or are for business purpose. Agents of the IRS are also looking at members http://www.phpaide.com/demos/PowerPetition/ of your crew to determine if they are misclassified as independent contractors and are in fact employees that you are required to include in your payroll.

3) Architecture companies including Landscape Architecture companies are on the IRS radar for proper accounting method classification cash or accrual basis and if the company is entitled to be a cash basis taxpayer. A big push by the IRS is to determine whether or not a company should be classified as a “Personal Service Corporation” taxed at a flat rate of 35%. Personal Service Corporations that have elected to be treated as S Corporations can bypass this flat rate tax.

If you fall into one of these industries or have general questions regarding the classification of any expenses in your business, don’t hesitate to give us a call.