The announcement comes as the IRS said it is increasing its oversight of small businesses and the reporting of taxes. The IRS believes that small businesses routinely under-report, and that this under-reporting is responsible for 84% of the $450 billion tax gap, reports the Examiner.
Below are eight areas the IRS is targeting, as compiled by the Examiner:
- Fringe benefits. The IRS believes that employers are not reporting employee fringe benefits like personal use of company vehicles.
- High income taxpayers. The IRS will focus on taxpayers with a total positive income of more than $1 million. Last year, the IRS audited 12.5% of all individuals with incomes of more than $1 million.
- Small business employee health insurance credit. This credit was first made available in 2010 and is now coming under IRS scrutiny. The IRS will look for compliance with eligibility requirements.
- International transactions. The IRS will focus on the international tax gap, individuals who hide assets overseas, and offshore transactions for large and small businesses.
- S corporations. The focus will be on deducting losses from S corporations and the use of S corporation distributions to avoid payment of Social Security taxes.
- Worker reclassification. Businesses may have an incentive to misclassify workers as independent contractors rather than employees, and the IRS believes that there is significant noncompliance in this area.
- Partnerships. This is a new area the IRS is targeting and the agency may take a look at large loss partnerships.
- Form 1099-K matching. The IRS announced that it will start Form 1099-K matching in late 2013. The IRS provided a reprieve from merchant card reporting on business returns for 2011 Schedule C and Forms 1065, 1120S and 1120; however, the IRS plans to change its approach after 2012 returns are filed. The IRS has indicated that it plans to pilot a business-matching program that can address a large amount of small business noncompliance.