October 12th, 2020

The Treasury Inspector General of Tax Administration (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 report, 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.

Did you recently have a Schedule C that looked something like the example above? Do you have an IRS audit underway and need help or a second opinion? We can help! Contact Tax Defense Ohio for a free consultation.