Tax filing and payment deadlines can be stressful for small business owners. The prospect of an IRS review will certainly intensify this pressure. As the U.S. Internal Revenue Service (IRS) will increase audits of companies this year, your return is likely to be selected as one of the returns for further review. Now is a good time to consider if the IRS audits your business to organize your records. Doing so will not only benefit your business, but it will also give you peace of mind. Here are the answers to some common questions about how far the IRS can go when reviewing your business records and returns.

How far can the IRS review your business?

initial, The IRS can review Your tax returns for any or all of the most recent three tax years. If auditors discover major errors or problems that lead them to believe that there may be reasons for further investigation, they may increase the scope of the audit. Generally, unless you suspect tax fraud or are unable to file tax returns at all, the IRS will not recall more than six years when reviewing your business.

How long can the IRS recover unpaid taxes?

Regardless of whether you think your income is taxable, you should earn at least $400 in self-employment income each year and you are taxable. It is important to file the return in a timely manner; failing to do so may mean losing any tax refund to which you are entitled. In most cases, the legal time limit for requesting a refund is three years.

In addition, if you owe taxes, but do not submit or pay when due, due to late submission penalty (failure to submit or non-payment of penalty) and interest (including interest) calculated from the date of payment, unpaid The amount will increase any applicable tax penalties. If you do not file a tax return, the IRS may eventually file an alternative tax return and send a notice of your debts.

Although the statutory time limit for taxpayers to apply for refunds is usually three years, the time limit for the IRS to assess and collect the tax owed does not begin until you submit your tax return. Therefore, if you have not filed your tax return for the previous tax year, then theoretically, audit the IRS to determine how much you owe and how far you can return it if you initiate a collection action without paying .

What happens if I do not owe taxes and do not file?

Tax declaration and tax requirements are actually separate obligations. In most cases, small business owners must file tax returns every year, regardless of whether they ultimately owe taxes to the IRS. The threshold for non-self-employed persons is the standard deduction (USD 12,400 for single taxpayers in the 2020 tax year), and the threshold for self-employed persons is much lower, with an income of only USD 400. If you made more than $400 in income for that tax year but did not file a tax return, the IRS may evaluate tax penalties.

Will the IRS forgive tax debts in 10 years?

The IRS can forgive tax debts and sometimes sign “compromise and preferential” agreements with taxpayers who have suffered severe financial difficulties and are indeed unable to pay taxes. However, such forgiveness is not common.

In other words, the statutory time limit for the IRS to collect tax is 10 years from the date of tax assessment. In theory, this means that any amount that the IRS cannot collect through payment or tax liens during this 10-year period is actually forgivable. However, there are some exceptions, exemptions and extensions that can complicate the calculation of the 10-year validity period. If business owners have questions or concerns about tax debts, or cannot pay tax debts, they should consult a tax lawyer.

Can the IRS keep your stimulus check?

Because they are designed to stimulate the economy, the economic impact stimulus payments that most taxpayers receive in 2020 and early 2021 include certain protective measures. Individuals and small business owners who owe taxes to the Internal Revenue Service or state tax authorities do not have to worry about withholding their stimulus payments to repay those taxes.

However, because the legislation authorizing the third stimulus payment has passed the budget reconciliation process so that it can be quickly signed into law, it cannot protect all types of seized payments. Specifically, if you have unpaid private debts, such as consumer debts in default or debts related to civil judgments, you may receive less than the full amount of stimulus you deserve.

If the IRS audits your business, organize and prepare

Small business owners should not worry about being audited, but should try to maintain an orderly and detailed record of income and expenditure, including tax-related documents and records. If you receive a notice that the Internal Revenue Service (IRS) wants to review your return, being able to easily retrieve the required documents will give you peace of mind.

For help in understanding your tax filing obligations, payment requirements, interpreting the IRS request letter or any other tax-related matters, please contact Rocket Lawyer on call_® lawyer Affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm, nor is it a lawyer or a substitute for a law firm. The law is complex and changes frequently.Seek legal advice Ask a lawyer.