The IRS is cutting 7,000 jobs. Will that help you escape an audit?
(This post originally appeared on The Washington Post)
The chance of your small business being audited is pretty darn low.
According to this analysis on MarketWatch from earlier this year, small businesses with less than $10 million in assets who filed a “C-Corporation” return in 2014 faced a 1 percent chance of being audited. That number goes down to 0.4 percent for those of us filing “S-Corporation,” partnership or multi-member Limited Liability Corporation (LLC) returns.
Could it go lower?
The Daily Mail reports that recently announced planned layoffs at three IRS processing centers would result in a loss of 7,000 jobs or 8 percent of its 84,000 member workforce between now and 2024. The jobs will not be replaced.
Cost savings over five years for shutting down centers in Covington, Ky., Fresno, Calif. and Austin, Texas are projected to total about $266 million with subsequent savings over $53 million, the IRS said in another report. This should please the hard-liners in Congress who have been successful in decreasing the agency’s budget by $900 million and 17,000 positions since 2010.
The reason? Technology. Between 2008 and 2015, the number of online tax returns went up from 58 percent to 86 percent. Less people are needed to handle less paperwork.
Will this mean even lower audit rates for small business owners? A decline in customer service? The agency promises the savings realized will be reinvested in taxpayer service, tax enforcement and information technology. It could also be argued that with more modern technology the IRS will be able to spot more discrepancies and red flags than before, which could trigger more requests for information and even increased audits.
So yes, audit rates for small businesses are likely to remain low. However, there’s no guarantee that they’ll go lower just because of these recent budget cuts. Then again, for those that file on time and keep good records none of this should be a concern, right?