October 12th, 2020 Brad Hennebert
The (TITGA) is the government tax watchdog. They perform annual audits of the IRS’s programs and operations. In a recent review of the “Tax Gap”, or the tax payment shortfall in relation to what is actually owed, the TITGA recommended the IRS look into taxpayers reporting Schedule C activity reflecting significant losses.
In a recent , TITGA shared the IRS estimates misreporting or underreporting of profits and losses to lessen the tax impact is causing this a gap of over $400 Billion (yes, with a B). This is either due to lack of detailed documentation by the taxpayer, or even fraud. Therefore, the TITGA recommended the IRS perform more audits, highlighting specifically those Schedule C returns that reflect little to no gross receipts or profits and equal to or greater than $100,000 in losses.
Who file Schedule C returns you ask? Sole proprietorships and single member LLCs do, which are many of our clients. Even with the impact of COVID-19, the IRS can and will look into returns that fit this mold, and as the business owner, you must ensure you keep detailed records in the event you get audited.