TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

IRS Audit Techniques Guides provide clues to what may come up if your business is audited IRS examiners use Audit Techniques Guides (ATGs) to prepare for audits — and so can small business owners. Many ATGs target specific industries, such as construction. Others address issues that frequently arise in audits, such as executive compensation and fringe benefits. These publications can provide valuable insights into issues that might surface if your business is audited. What do ATGs cover? The IRS compiles information obtained from past examinations of taxpayers and publishes its findings in ATGs. Typically, these publications explain: The nature of the industry or issue, Accounting methods commonly used in an industry, Relevant audit examination techniques, Common and industry-specific compliance issues, Business practices, Industry terminology, and Sample interview questions. By using a specific ATG, an examiner may, for example, be able to reconcile discrepancies...

The following are the latest items the IRS focuses on for Tax Audits: 1. Company Cars -  Employers frequently don't report the taxable benefit that employees receive from their personal use of company-owned cars. The IRS plans to focus on the use of company cars, especially "luxury" models, in its next series of audits.   2.   High Income Taxpayers -   The IRS will aggressively pursue self-employed taxpayers with gross income of more than $1 million. In 2011, the IRS audited 12.5 percent of all individuals with incomes of more than $1 million (up from 8.4 percent in 2010). These audits are frequently performed by the LB&I audit groups and are much more invasive than typical audits. These audits should always be fought with a tax attorney. 3.   Form 1099-K Matching -  Form 1099-K (credit card) matching payee statements with receipts will be the focus of small business auditing. This is the new "cash audit" program and will focus on restaurants and...