Sole Proprietors: Work with Experienced Advocate to Effectively Handle IRS Audit
For those who are in business for themselves as sole proprietors, managing tax compliance is an important task. Not only is there income tax and the obligation to report profits, but also self-employment tax, quarterly estimated tax reporting, social security and Medicare taxes and tax withholdings, federal unemployment tax, and other potential tax obligations as well.
According the estimates from the IRS, about $125 billion in individual business income goes unreported, most of which involves sole proprietors. Sole proprietors pay business taxes based on their personal income tax returns and it can be a challenge for the IRS to keep track of their cash flow. For this reason it can be relatively easy for sole proprietors to fudge the numbers and engage in fraud.
Auditing taxpayers is the primary tool the IRS uses to address noncompliance. Unfortunately, the IRS’ own research shows that audits are not that effective at deterring tax fraud and evasion in the long-term, particularly in areas where tax fraud is more common.
Navigating tax obligations and staying in compliance can be a challenge without professional help, particularly when the IRS initiates an audit. Most of those who are subjected to a tax audit do not intentionally seek to defraud the government. For many business owners, an audit occurs because they do not fully understand their obligations or they fail to keep accurate records. Ensuring tax liability requires not only accurate record-keeping and reporting, but also effectively handling an IRS audit.
