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The Pros And Cons Of IRS

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If you are self-employed or work as an independent contractor, you are likely familiar with the US Internal Revenue Service's Form 1099, which serves a purpose similar to that of a W-2. Even though Congress recently repealed an expansion of the Form 1099 reporting requirement, that would have placed additional burdens on the time and resources of small businesses, the accounting and tax burdens placed on those same businesses still remains.

The Small Business Jobs Act of 2010, along with the Health Care Reform Act of 2011, allowed small businesses to enjoy significant credits and deductions for items such as capital investments and health insurance on their 2010 tax returns.

While most are enjoying the extra revenue, some are worried that the constantly …show more content…

For them, such oversights can lead to an IRS audit. Combined with the resulting penalties, the time a resources consumed during a tax audit can be crippling, if not downright fatal, to a small business.

In a recent speech held at the National Press Club, Internal Revenue Service Commissioner Douglas Shulman informed attendees that, for small business accounting returns with compliance issues, an audit can take place up to three years after its receipt, possibly longer in some cases.

Shulman acknowledged the dilemma presented to taxpayers who, after such a period of time, have already spent their refunds, unaware that they were not entitled to the money. Adding to the burdens of such a finding is the requirement that those found to be in violation must, in addition to the undeserved portion, also pay the IRS three years accrued interest on both the balance and the resulting penalties.

"Taxpayers ask, 'Why didn't you notify me earlier?'" Shulman says. "This hurts the IRS' image and contributes to a 'gotcha'

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