Page 7 - Aruba Today
P. 7
U.S. NEWS A7
Friday 1 April 2016
US Financial Front:
Businesses fear IRS audits but good records can ease pain
JOYCE M. ROSENBERG or thousands of dollars, de- that run up a tax bill attract pay people in cash and not owner’s return, the busi-
AP Business Writer pending on how much an the notice of the IRS, which keep records? The answers ness part can also be au-
NEW YORK (AP) — The sigh accountant or attorney will want to know why the were no and the questions dited. And vice versa.
of relief a business owner charges and how long the government isn’t getting its were unnerving. Shelley Armato, her hus-
heaves after filing an in- audit takes. An owner still money. “You start to wonder if we band and their construc-
come tax return may be needs to be prepared to missed something,” he re- tion software company,
quickly followed by an un- answer questions that an
settling thought: What if I’m IRS agent has, says Todd This photo shows the headquarters of the Internal Revenue Service (IRS) in Washington. The sigh
audited? Simmens, a managing of relief a business owner heaves after filing an income tax return may be quickly followed by an
Owners dread an audit not partner with the account- unsettling thought: What if I’m audited?
just because they might get ing firm BDO.
a big bill for unpaid taxes, “You need to be making (AP Photo/J. David Ake)
interest and penalties. Au- sure you’re able to explain
dits can also be time-con- your business, what you A DISPUTE LEADS TO AN AU- calls. MySmartPlans, were au-
suming and expensive, in do,” Simmens says. DIT About two months after the dited in 2010 after the cou-
some cases lasting months Robert Barrows learned Attorney Steven Lesav- audit, Lesavich got a letter ple took a deduction for a
or even years, distracting from three audits in the ich was audited because saying the IRS had located $500 donation to a funeral
owners from running their 1980s and ‘90s that good the IRS had no record of his payments. But the expe- home. The IRS questioned
companies and requiring records were critical. He monthly tax payments he rience, which lasted about the donation because
them to pay accountants had to pay $180 in back made over five years. The six months, cost Lesavich a it hadn’t been made to
or lawyers to deal with the taxes because of a math- agency sent him a letter in total of $15,000 for his ac- what’s called a qualified
government. But compa- ematical error, but his com- 2008 demanding payment countant’s fees and rev- charity; the couple gave
nies that keep good finan- pany’s books supported and warning that his bank enue lost when he spent the money to help a fam-
cial records can make the everything on his return. accounts could be seized. time on his tax problems, ily who couldn’t afford their
process easier. He’s still making sure he has Although his accountant not with clients. The ac- child’s funeral.
The IRS audited less than 1 meticulous records. provided documentation countant’s fees were de- On the day of the audit,
percent, or nearly 1.4 mil- “I’m too afraid of getting that the payments were ductible as a business ex- which Armato calls “a
lion, of the nearly 192 mil- audited, so why take a made, the IRS didn’t ac- pense, but the tax code stressful time, to say the
lion tax returns filed in 2014. chance?” says Barrows, cept the proof. The agency doesn’t allow lost revenue least,” two IRS agents ar-
That included business and who owns an advertising said Lesavich, who prac- to be deducted for service rived at the Armatos’ Kan-
personal returns and audits and public relations busi- tices in Kenosha, Wisconsin, providers like lawyers. sas City, Kansas, office and
conducted either by letter ness in San Mateo, Califor- would have to agree to an PERSONAL RETURNS MATTER began examining a year’s
or in person, according to nia. audit if he didn’t want his TOO worth of personal and busi-
the most recent available Business returns can be accounts frozen, and he Many owners, including ness papers. The couple’s
IRS figures. The audits result- selected randomly by IRS said OK, hoping it would re- sole proprietors, partners accountant handled most
ed in an additional $25 bil- computers if they deviate solve the dispute. and shareholders in com- of their questions; there
lion in taxes recommended from what’s considered The accountant handled panies known as S corpo- were no problems with the
by IRS agents, and more the norm, the agency says. most of the audit, but the rations, report business in- company’s income or ex-
than $7 billion in refunds, For example, does the re- agent had questions for come when they file their penses. In the end, the Ar-
the IRS says. turn claim an amount of Lesavich: Had he paid a personal 1040 forms. If there matos got a $600 refund
In a typical business return expenses that seems too vendor but not sent a re- are questionable items in because they’d overpaid
audit conducted in person high? A company or owner quired 1099 form? Did he the personal portion of an their taxes.q
— the kind business owners can also be audited if the
fear the most — IRS agents IRS discovers they haven’t
examine a company’s reported all their income;
ledgers, bank statements, this can happen if the
invoices and receipts to IRS has received a 1099
see if it reported all its in- form reporting income
come and if the expenses it that wasn’t included on
claimed are legitimate. the business return. If one
In-person audits often take partner or investor in a busi-
place at a company’s of- ness is audited, other part-
fices. Tax professionals ad- ners may be audited too.
vise owners not to handle Companies also may be
an audit on their own, to audited if they don’t pay
instead ask an accountant their taxes, says Amy Vet-
or lawyer to do the talking ter, an accountant and
to the IRS, a service that vice president at software
can run into the hundreds maker Xero. Companies
