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IRS
October 16 2017

IRS Exam Staffing Falls – Audit Coverage Declines

Audit Advice, News Letters

IRS Exam staffing in fiscal year (FY) 2016, the latest tax year with statistics available, reached a 20-year low. As a result, the Treasury Inspector General for Tax Administration (TIGTA) has reported that the IRS undertook fewer audits.

Staffing

“Examination is a vitally important aspect of maintaining a voluntary tax compliance system because 85 percent of the Gross Tax Gap is comprised of underreported tax on timely filed returns,” TIGTA reported. Although hiring increased in FY 2016, it did not make up for recent attrition and retirements, TIGTA found. Examination staffing in FY 2016 reached a 20-year low with 8,847 employees, a decrease of four percent from FY 2015 (9,189 employees) and 23 percent lower than FY 2012 (11,432 employees).

Overall, the number of IRS full-time employees has declined by some 14 percent since FY 2012. The decline in the number of employees is likely to continue, TIGTA predicted. Approximately 22 percent of full-time permanent employees in the IRS are eligible to retire, and the IRS expects this number to increase to 34 percent by 2019, TIGTA found. “Should this loss of staffing be realized, the gap created by the loss of knowledge and experience has the potential to materially affect the administration and enforcement of tax laws,” TIGTA reported.

Audit coverage

Individuals. TIGTA reported that the IRS examined one of every 143 individual income tax returns in FY 2016. This reflected a 16 percent decline compared to FY 2015 and 30 percent fewer examinations than the five-year high reported in FY 2012. The IRS examined one in 17 returns in FY 2016 with more than $1 million in income, which, according to TIGTA, is a decline of 29 percent compared to FY 2015.

Corporations and S corps. TIGTA found that fewer corporate tax returns were examined during FY 2016 than any year since FY 2004. The number of S corp examinations fell 15 percent from FY 2015 to FY 2016 (one in every 295 S corp returns in FY 2016 compared to one in every 248 S corp returns in FY 2015).

Partnerships. Partnership examinations also declined, TIGTA found. The number of partnership returns examined decreased 24 percent from FY 2015 to 14,645 in FY 2016. “Due to a focus on partnership examinations in FY 2015, one of every 196 returns filed were examined; however, this number decreased to one of every 263 returns being examined in FY 2016,” TIGTA reported.

TIGTA Ref. No. 2017-30-072

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FinCEN

Federal Beneficial Ownership Reporting

 

FinCEN is now Requiring Beneficial Ownership Information (BOI) to be reported through their BOI E-Filing System.

 

Do I Need to Report?

Most businesses are small businesses that may need to file. Your company may need to report information about its beneficial owners if it is:

  • A corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
  • A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing with a secretary of state.

There are 23 types of entities that are exempt from the beneficial ownership information reporting requirements. FinCEN’s Small Entity Compliance Guide includes checklists for each of the 23 exemptions that may help determine whether your company qualifies for an exemption.

When Do I Report?

Reports began being accepted on January 1, 2024.

  • If your company was created or registered before January 1, 2024, you will have until January 1, 2025, to report BOI.
  • If your company is created or registered on or after January 1, 2024, you must report BOI within 90 days of notice of creation or registration. Beginning in 2025, that reporting window is 30 days.
  • Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.

What information do I need to report?

All Companies who are subject to BOI filing, must report the name, address ID number, phone number, business ownership, and more…..for each of the following persons.

·         Any individual who either directly or indirectly exercises substantial control over the reporting company

·         Any individual who owns or controls at least 25% of the reporting company’s ownership and/or management interests

·         The individual who registered the reporting company with their Secretary of State

What Penalties could my business face?

·         A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues.

·         That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000.

·         Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

How can Deanna Ramsey CPA LLC help?

·         This is a new requirement that will affect most businesses operating in the United States.  The process is detailed and must be completed accurately!

·         We already know how to file this report online and are happy to assist with the process.

For more information, visit FinCEN’s website, view FinCEN’s Frequently Asked Questions (FAQs), or contact FinCEN.