Would Your Virginia Business (or Would You Personally) Be At Risk During an IRS Audit?

Now that tax season is over, IRS audit season begins. While the IRS audits businesses (and business owners) year-round, the months after tax season are typically when we see some of the highest audit numbers of the year. So, if the IRS audits your business, would your business (or would you personally) be at risk? Learn about some key considerations from Virginia business tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

Common Issues During IRS Business Tax Audits

When scrutinizing businesses’ returns, the IRS looks for evidence of any and all forms of tax evasion and tax fraud. This includes both income and employment tax violations, and it includes violations that are both civil and criminal in nature. With this in mind, some of the most common issues that arise during IRS business tax audits include:

Income Tax Violations

• Claiming personal expenses as business expenses
• Claiming other improper business deductions
• Underreporting taxable income
• Claiming fraudulent losses
• Failing to report income from cryptocurrency transactions
• Failing to disclose foreign-source income
• Using abusive tax shelters to evade federal income tax

Employment Tax Violations

• Failure to collect the employee’s share of employment taxes
• Failure to remit the employee’s share of employment taxes
• Using employees’ trust funds to cover business expenses
• Improperly calculating the employer’s share of employment taxes
• Failure to pay the employer’s share of employment taxes
• Falsifying payroll numbers
• Improperly claiming the Employee Retention Credit (ERC)

While these are among the most common issues we see during IRS business tax audits in Virginia, these are by no means the only issues that can lead to liability for back taxes, interest and civil penalties. With the IRS ramping up its enforcement efforts in 2024, criminal prosecution is a very real concern as well; and, when facing audits, businesses (and their owners) must be prepared to successfully challenge allegations that they have intentionally underreported or underpaid what they owe.

Risks for Business Owners During IRS Business Tax Audits

When auditing businesses’ income and employment tax returns, the IRS often scrutinizes business owners’ activities as well. This includes owners’ participation in the preparation of fraudulent business tax returns as well as their submission of fraudulent individual filings.

From improperly managing employees’ funds held in trust to fraudulently claiming personal travel as a business expense, business owners can face a wide range of allegations from the IRS. Business tax audits will frequently lead to individual tax audits as well, and they can also lead to criminal tax fraud investigations in some cases.

Schedule a Confidential Consultation with Virginia Business Tax Lawyer Kevin E. Thorn

If you need to know more about how to protect your business (or yourself) during an IRS audit in 2024, we invite you to get in touch. To schedule a confidential consultation with Virginia business tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752 or contact us confidentially online today.