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IRS Audits Targeting Virginia Businesses: Issues, Risks and First Steps

News, Offshore Account Update

Posted in on March 15, 2024

The Internal Revenue Service (IRS) is devoting additional resources to auditing businesses in 2024. IRS business tax audits present several risks, and targeted businesses must work with experienced tax counsel to make informed and strategic decisions during the audit process.

What do you need to know if the IRS is auditing your business in 2024? Here are some key insights from Virginia business tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

Common Issues During IRS Audits Targeting Virginia Businesses

When auditing businesses, the IRS looks for evidence of any and all forms of noncompliance. While any single issue can expose a business (and potentially its owners) to substantial liability, it is not uncommon for multiple issues to arise during an IRS audit. This includes common business-related issues such as:

  • Invalid business expense deductions (including claimed deductions for personal expenses)
  • Improper payroll reporting and employment tax remittance
  • Improper reporting of gain and loss resulting from transactions involving real estate, cryptocurrency and other assets
  • Improper depreciation cost claims
  • Fraudulent Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) loan applications and forgiveness certifications
  • Fraudulent Employee Retention Credit (ERC) claims
  • Use of abusive tax avoidance schemes

Risks for Businesses (and Business Owners) Targeted By the IRS

While all IRS business tax audits present substantial risks, the specific risks involved in any particular audit depend on the relevant facts, the relevant law, and the available documentation. With this in mind, the potential risks involved in facing IRS business tax audit include:  

  • Back Taxes and Interest – If a business (or its owners) has underpaid their federal tax liability, an audit can result in liability for back taxes and interest (which is calculated from the date of nonpayment or underpayment).
  • Civil Tax Penalties – Federal tax reporting and payment violations can also trigger civil tax penalties. These penalties are typically calculated as a percentage of the amount owed.
  • Criminal Investigation and Prosecution – If an IRS audit uncovers apparent evidence of intentional tax evasion or tax fraud, the audit could trigger a criminal investigation—which may ultimately lead to prosecution by the U.S. Department of Justice (DOJ).

What Are Your First Steps After Receiving an Audit Notice from the IRS?

For businesses that receive an audit notice from the IRS in 2024, the first step is to engage experienced tax counsel. Executing a strategic defense is critical, and a proactive approach can help prevent unnecessary consequences. An experienced Virginia business tax lawyer will be able to help you make informed decisions, communicate with the IRS on your company’s behalf and help steer the audit toward a favorable resolution.

Schedule a Confidential Consultation with Virginia Business Tax Lawyer Kevin E. Thorn

If the IRS is auditing your business in Virginia, we can help, and we encourage you to contact us promptly for more information. To schedule a confidential consultation with Virginia business tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752 or request an appointment online today.

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