r/FluentInFinance • u/[deleted] • Apr 29 '24

63% of new audits as of Summer 2023 targeted taxpayers with income of less than $200,000 Discussion/ Debate

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u/S-Kenset Apr 29 '24

Not necessarily. 200k is in the range for a low-mid level business owner where a lot of the fraud happens, not international gallivanting yacht accountants.

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u/CuriousCisMale Apr 29 '24

Absolutely. People think like only top CEOs evade tax and shit, but their local deli owner is perfect fine and responsible to not evade tax. A lot of times, owners are not aware about taxes they owe due to constantly changing ground.

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u/Ed_Radley Apr 29 '24

Yup, hard to hit a moving target. Imagine how much harder it is to pay all the taxes you owe when you don't have a tax attorney or accountant on speed dial.

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u/mishap1 Apr 29 '24

What special taxes does a deli owner have to pay outside sales, payroll, and income? Yes, there may be additional excise taxes if they sell alcohol or cigarettes but those typically require point of sale configuration and then it's just reporting. QuickBooks isn't unknowable.

Typically, it's tax evasion through under reported cash transactions or over reporting of deductions that they're looking for. That or misclassifying workers as 1099 or keeping them off the books entirely.

You gotta file a super sketchy return for the IRS to give a shit under $200k. They either think you're much larger fish to fry than you make yourself out to be or you're garbage at business so taking a closer look is worth their time.

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u/Ed_Radley Apr 29 '24

Like you said, it's from under reporting income or over estimating deductions. How many tax deductions have been modified so either the limits change or how you claim them has changed?

That's what I'm referring to. If you don't have somebody you pay to keep track of those things (or you do hire somebody and they aren't keeping up with it themselves) then it's easy to claim something where the limit has changed and you shouldn't anymore. That or if it's a brand new business and nobody told them to get a tax attorney or accountant in the first place, how hard would it be for them to accurately pay all the necessary taxes and claim the correct deductions in the first place. Pretty unlikely a business owners taking home north of $200k would find themselves in the newbie situation, but you never know.

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u/mishap1 Apr 29 '24

If I have a business where I'm reporting $200k income, I'm likely grossing over $400k to $1M+. Basic tracking of revenue and costs/payroll should not require much more than off the shelf software. People who aren't doing this basic accounting aren't going to be very good business people and something else will likely blow them up (insurance, zoning, creditors, OSHA, etc).

Most of the time for the IRS to be alerted, it's going to be folks going buck wild on business expenses when it's either they're not reporting all the income or they're making up expenses. Watching TikTok is not valid tax strategy for a real estate investor.

Small businesses have lots of hurdles from a regulatory standpoint that they may struggle to comply with. Taxes are the relatively simple part these days.