Partnership tax audits present substantial risks. If the Internal Revenue Service (IRS) determines that a partnership has underreported or underpaid its federal tax liability, it can impose liability for back taxes, interest and penalties. If the audit uncovers evidence of intentional tax evasion or tax fraud, auditors can also hand over the matter to IRS Criminal Investigation (IRS CI) for further inquiry and a possible referral to the U.S. Department of Justice (DOJ).

The Paycheck Protection Program (PPP) and Employee Retention Tax Credit (ERTC) were relief programs intended to help support qualifying businesses during the COVID-19 pandemic. Unfortunately, both of these programs became targets for fraud; and, as a result, IRS Criminal Investigation (IRS CI) is now scrutinizing businesses in Virginia and other states that took advantage of these programs.

The Internal Revenue Service (IRS) recently announced that it is targeting businesses that have improperly claimed the Employee Retention Credit (ERC). It is conducting both audits and criminal investigations focused on uncovering fraud during the 2020 and 2021 tax years.

While most taxpayers in the U.S. are familiar with Form 1040, this is just one of several forms that taxpayers may need to file by Tax Day (which is April 18, 2023). Individual and corporate taxpayers may need to file a variety of other forms as well, and failure to file any required form could lead to unwanted scrutiny from the IRS—along with interest and penalties.

Whether you are a Virginia resident who spends time working abroad or you have accounts or investments offshore, you need to make sure you dutifully meet your obligations to the IRS. Underreporting foreign income and assets can trigger an IRS audit or investigation, and both underreporting and underpayment can lead to steep penalties.