Posted On September 28, 2012

Nevada tax audit: IRS increasing scrutiny on small businesses

Nevada small business owners may want to be extra diligent with their tax returns next year. The IRS has recently announced they will be focusing on eight specific tax audit areas for the upcoming year. They are beginning to target the practice of underreporting within the small business arena, something they believe could be responsible for over 80 percent of the $450 billion tax gap.

Fringe benefits is one of the areas on which the IRS will be placing increasing scrutiny. Research from prior audits shows that employers are failing to report when their employees use company vehicles for personal use by using Form 1099 or on the W-2. The IRS will likely be looking into the use of all of a company’s vehicles, especially those considered luxury autos. Also, high income taxpayers can expect extra scrutiny this year, especially those who bring in a total annual income of over $200,000.

Health insurance could be another trigger that leads the IRS to take a closer look at a small business during tax audits. Last year was the first year that small businesses could claim a health insurance credit. This year, the IRS will be taking a closer look to ensure business owners are complying with the credit’s eligibility requirements. They will also be examining loss partnerships within small businesses and ‘specific abuses’ the IRS found during their earlier research into partnerships.

Other areas will also come under closer scrutiny for a tax audit, so it is important for small business owners in Nevada to ensure that they are keeping meticulous records. A tax audit can be overwhelming for a small business owner; however, there is assistance available from knowledgeable professionals if it becomes too difficult to handle while also running a business. A tax audit isn’t the end of the world, but advanced preparation and good record keeping can make it go much more smoothly.

Source: Examiner.com, “IRS announces increased audits on small businesses in 2013,” Jennifer Capezzuto, Sept. 17, 2012