IRS on the Hunt, Study Shows Increasing Audits for Small Businesses

  •  Posted by Michael Beauchemin on Thu, Apr 07, 2011 @ 10:25 AM

    The IRS appears to be gearing up and increasing audits for small businesses.  Listed below are 3 recent event that supports this trend.

    bookkeeping small business checkup

    1. A study by Syracuse University’s Transactional records Access Clearinghouse (TRAC) shows a 30% increase of audits to small businesses.
    2. The budget proposal, released in mid-February by President Obama, calls for 5,100 new IRS revenue agents.
    3. Last year, the IRS purchased between 1,500 and 2,000 QuickBooks licenses, trained auditors how to use Quickbooks and confirmed that they would be requesting electronic copies of bookkeeping records.

    A study conducted by Syracuse University’s Transactional Records Access Clearinghouse (TRAC), showed that IRS has increased the audits on small businesses.  A small business in the study is defined as one that has less than $10 million in assets.  The number of audits to small businesses has increased by 30%, while the number of audits on large companies has decreased by 33% over the same time frame.  Correspondingly, the number of IRS agents has increaed by 6% over the same time frame.

    small business auditsSource: Transactional Records Access Clearinghouse – Syracuse University

    When President Obama’s budget proposal was released in mid-February, it called for an additional 5,100 new IRS revenue agents.  Obviously, these IRS revenue agents will not be mailing out thank you letters to taxpayers.

    Finally, last year between 1,500 and 2,000 Quickbooks licenses were purchased and a large number of IRS revenue agents were trained how to use QuickBooks.  Also, According to IRS Revenue Procedure 98-25, the IRS has the authority to request electronic records, including the popular business software program QuickBooks, as well as Peachtree, Great Plains or any other software program businesses use to maintain their books.

    Given the proliferation of small businesses using QuickBooks, the increased number of audits to small businesses and the increased number of revenue agents, one can conclude that the IRS has taken a special interest in small businesses and put small business owners on alert.

    If you are a small business owner and require support or would like to see what areas may create a problem for you during an IRS audit you can contact us for a free-checkup.