IRS Tax Audits Targeting Maryland Businesses: Common Issues and Potential Defense Strategies

Federal tax audits present substantial risks for businesses of all sizes. Not only can the Internal Revenue Service (IRS) impose liability for back taxes, interest and penalties, but IRS audits can also lead to federal criminal charges in some cases. To mitigate their risk, companies targeted by the IRS must play an active role in the audit process, and they must work with an experienced Maryland business tax attorney to execute an informed and cohesive defense strategy.

Common Issues in IRS Business Tax Audits

One of the keys to executing a successful IRS audit defense is to identify any and all issues that are likely to come up during the audit process. While the IRS prioritizes enforcement in certain areas, all types of issues can (and do) lead to costly outcomes. Some examples of common issues in IRS business tax audits include:

• Claiming false or inflated business expense deductions
• Claiming personal travel and other personal expenses as business deductions
• Reporting false payroll figures or failing to properly account for employment taxes held in trust
• Improperly reporting gain or loss on real estate, cryptocurrency and other assets
• Improperly claiming the Employee Retention Credit (ERC)

Again, these are just examples. Identifying the issues that are likely to come up during an IRS audit involves conducting an internal, attorney-client privileged risk assessment as soon as possible after learning of an impending audit. By understanding what revenue agents are likely to uncover during the audit process (if anything), targeted businesses can work with their counsel to execute a focused and strategic defense.

Potential Defense Strategies for Targeted Businesses

Regardless of the specific issue (or issues) involved in an IRS audit, a targeted business will have several potential defense strategies available. The key is to work with experienced counsel to choose the most prudent strategy based on the circumstances at hand. Maryland business tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, has extensive experience helping businesses execute strategies including (but not limited to):

• Demonstrating Full Compliance with the Internal Revenue Code – When possible, demonstrating full tax law compliance with documentation that the business has on hand will generally be the best and most efficient way to favorably resolve an IRS business tax audit.
• Challenging Flaws and Assumptions During the Audit Process – Business tax audits often involve highly complex issues that don’t necessarily have clear-cut answers. In these cases, challenging any flaws or assumptions that have the potential to lead to an unfavorable result can be critical for avoiding unnecessary consequences.
• Seeking a Tax Settlement or Offer in Compromise – When a business needs to resolve past filing errors or payment deficiencies in response to an IRS audit, seeking a tax settlement or offer in compromise can significantly mitigate the financial consequences involved.

Request a Consultation with Maryland Business Tax Attorney Kevin E. Thorn

Is the IRS auditing your business in 2024? Or do you have concerns about your business’s liability if the IRS conducts an audit in the future? If so, we can help. To request a confidential consultation with Maryland business tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 240-235-5096 or tell us how we can contact you online today.