Can Your Business Be Audited During the COVID-19 Crisis?

Normally, about 2.5% of small businesses are audited by the IRS. However, these numbers have dropped during the COVID-19 crisis as the IRS refrained from initiating new audits for a time. However, you are still able to be audited during the pandemic, even if it may be more difficult.

Audits May Happen Again

Not only do you have to worry about a tax audit while COVID-19 ravages, but the issues caused by the pandemic may raise even more flags for IRS auditors. The IRS will be carefully checking your business deductions, perhaps even more so than usual if your business was shuttered for months.

The IRS is still in business during the pandemic. It was among the first agencies to call its employees back to the office because it needed to be ready to process all of the tax returns coming in by the July 15 deadline. They are on the job and enforcing tax laws.

Audits Were Previously Suspended

The IRS had previously issued guidance that stated it was giving taxpayers relief from audits during the COVID-19 pandemic. This guidance said that the IRS would not begin any new audits and would only continue to work on existing audits. The only exception to this was if the statute of limitations would have run out if the IRS did not open an audit. However, the moratorium lasted only until July 15, 2020, which was the day that the IRS went back to work to process incoming tax returns. Now that the IRS is back on the job, there would be nothing to stop them from opening an audit on your Cherry Hill small business.

Now, the IRS is back to work and again beginning audits. However, the agency has a significant backlog from when it was not in the office and opening mail. Moreover, IRS employees still have millions of tax returns to process. This will mean that, for the foreseeable future, its ability to engage in audits will be more limited. However, the IRS will eventually return to full capacity.

Even if the IRS is slow to open new audits, an NJ tax lawyer will tell you that agents are not shying away from continuing audits that were already opened before the pandemic hit the U.S. If you have an existing audit, you’ll likely hear from agents. Furthermore, the IRS’s efforts will continue regardless of whether there is a physical office opened.

Audits May Be Tough, But They Are Still Possible

None of this means that your small business cannot be audited right now. The Tax Code is still in existence, and you have legal obligations to the government. These will apply unless Congress passes a law that temporarily gives your business relief from certain regulations. Unless the IRS announces another program like the People First Initiative, audits will continue, albeit with some logistical hurdles due to the pandemic.

It’s important to remember that the Internal Revenue Service faces some real challenges right now. For example, some IRS local offices remain closed and its employees are working remotely. In addition, if the IRS does have an ongoing audit, they will be restricted from using some of its more potent tools until the pandemic eases. One of these tools is the dreaded face-to-face meeting that you would have with agents. While they could still have contact with you remotely, they cannot meet in person with you right now.

Thus, while the IRS can theoretically audit your Cherry Hill small business, it will not be easy for them to do so. Nevertheless, you shouldn’t take your tax obligations lightly. Be sure to pay and document your taxes because the IRS has three years to open an audit, so they can pay attention to you after the pandemic has wained.

For tax help in Cherry Hill, contact an NJ tax lawyer at the Dopkin Law Firm at (215) 519-4269. We’re ready to discuss your business tax matter.