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In an article published in Pennsylvania CPA Journal / CPA Now on November 16, 2020, Chamberlain Hrdlicka Philadelphia-based Shareholder Phil Karter discusses what you need to know about the IRS audit process.
“Despite the generally low rates of audits, the IRS tends to gravitate toward certain hot button issues that can increase the chances of instigating an examination,” explains Karter. “These include unreported income (especially where there is nondisclosure of foreign assets), excessive business tax deductions (particularly for Schedule C businesses), loss limitations (such as passive, hobby, and deductions limited by “at risk” rules), information mismatching (such as on W-2s and 1099s), payroll tax reporting, worker classifications, executive compensation, and large loss partnerships. Not surprisingly, the more income a taxpayer earns, the greater the risk of audit.”
Karter further provides tips to prepare for an audit. He explains that, “the IRS’s goal in any audit is to review and examine an organization's or individual's accounts and financial information to ensure information is reported correctly according to tax law and to verify the reported amount of tax is correct.”
To view the full article, click here.