“The difference between tax avoidance and tax evasion is the thickness of a prison wall.” — Denis Healey

I bring this quote up today to say, the IRS isn’t messing around lately. They’re cracking down on businesses playing fast and loose with their tax obligations.

Now, most Long Island business owners and taxpayers are honest about their tax reporting. But there are plenty that aren’t and these are the ones the IRS especially wants to sniff out.

Let’s look at 2023 for example. The IRS Criminal Investigation (CI) unit identified a record $37.1 billion in tax and financial crimes, exceeding the previous year’s $31 billion. And CI initiated 2,676 criminal investigations and obtained an 88.4% conviction rate. Those are some of the best enforcement numbers the IRS sees across the board.

I want to help you avoid IRS trouble and potential penalties or audits as best I can. Obviously, there are never any guarantees about avoiding an audit, but the better you are at following the rules, the less likely you are to get that kind of scrutiny.

There are some key areas that the IRS focused on in 2023 that we should take a look at for managing your tax situation this year and helping you avoid IRS trouble:

Tax compliance
The IRS carefully audited internal controls like documentation processes. They also reviewed industry regulations to catch non-compliance. 

For you: This means ensuring your tax records are meticulously organized and all industry rules are followed. Detailed recordkeeping and clear documentation of your tax prep process are key to helping you avoid compliance-related IRS trouble.

Employee Retention Credit
In the second half of 2023, the IRS became laser-focused on weeding out bad characters who falsely claimed the ERC. They stopped accepting ERC applications and have already examined hundreds of claims for discrepancies. So far, there have only been a few convictions, but this year promises more to come for those who claimed it without proper eligibility. 

For you: To avoid similar risks, if you claim the ERC, you’ll want to have clear documentation that proves you were qualified to claim it. Self-auditing your eligibility now will keep you from facing some big penalties later. 

And if you were one of those that were convinced by an ERC mill to file a falsely, you can withdraw your ERC claim, but there are parameters around who qualifies for this option. If you willingly filed a false claim, know that withdrawing your claim doesn’t exempt you from being investigated by the IRS CI unit.

Income reporting
Unexplained income sources or inconsistencies prompted a lot of 2023 audits. This year, the IRS will likely continue scrutinizing deposits and income history for gaps or discrepancies. This includes gig economy jobs and a host of other income sources.

For you: Carefully reconciling accounts and proactively seeking help for any unclear income is key. You can’t avoid IRS trouble if you aren’t even keeping track of the basics and reporting it to Uncle Sam. Take some time now at the beginning of the year to set up some systems to track your income and make sure your systems are updated to track it.

Crypto investigations
We’ve seen lots of headlines about those in the crypto industry failing to hold up their end of things with taxes. CI’s advanced data analysis uncovered more crypto-related tax evasion in 2023, taking a careful look at high-dollar crypto transactions and leveraging AI and shared information from collaborating agencies. 

For you: Make sure you know exactly what your responsibility is with reporting crypto transactions. The IRS has plenty of guidance for that (and I’m here for you, too). 

Build your shield this year
While this increased oversight from the IRS can feel daunting, viewing the agency as partners in a fair system, not adversaries, is really helpful for making the right decisions moving forward. Strong internal controls, tax law awareness, and open IRS communication will help you build a “shield” against penalties and avoid IRS trouble.

And if issues do arise, consulting a quality Suffolk County tax professional who understands exactly how to resolve these matters is in your best interest. Of course, I’m here for you, but if not me, find someone whose track record is stellar when it comes to managing IRS interactions, negotiating settlements, and protecting their clients’ interests.

As a tax resolution specialist, I’ve seen firsthand the consequences of facing the IRS unprepared. But it doesn’t have to be that way. I’m here for you:
516-442-4579

And, despite the IRS crackdown efforts, don’t let the fear of the IRS paralyze you. Take control, build your financial shield, and breathe easier this year.

Helping you avoid IRS trouble,

Frantz Pierre-Louis