The Inflation Reduction Act

Everything You Need to Know About the Inflation Reduction Act

The Hartford

Transcript

The views and opinions expressed on this podcast are for informational purposes only, and solely those of the podcast participants, contributors, and guests, and do not constitute an endorsement by or necessarily represent the views of The Hartford or its affiliates.

You’re listening to the Small Biz Ahead podcast, brought to you by The Hartford.

Our Sponsor

This podcast is brought to you by The Hartford. When the unexpected strikes, The Hartford strikes back for over 1 million small business customers with property, liability, and workers compensation insurance. Check out The Hartford’s small business insurance at TheHartford.com.

Gene (00:02):

Hey everybody, this is Gene Marks and welcome to The Hartford’s Small Biz Ahead podcast. Thanks for joining me this week. Let’s get to it. This week, I would like to talk about something that’s recent in the news: The Inflation Reduction Act. Now listen, obviously it’s a political law. There’s lots of opposition and support for the Inflation Reduction Act. But one thing I wanted to bring to your attention as a small business owner, is potentially, the potential of more audits that are gonna be done on smaller businesses. The Inflation Reduction Act, it was just signed into law this past week. It contains $80 billion in additional funding for the Internal Revenue Service which the Congressional Budget Office is estimating will yield in hundreds of billions of new revenues from enforcement.

Gene (00:53):

$46 billion of the $80 billion is gonna be spent on hiring more agents. A lot of it is also gonna be spent on modernizing the IRS’s existing systems. Now, just to be clear, Treasury Secretary Janet Yellen has said in a public letter that small businesses that make less than $400,000 a year would not be subject to audits, but opposition groups have different opinions on that. Some believe that the IRS will have to target small and medium sized businesses because small businesses tend less to fight back than bigger companies and to meet those hundreds of billions of dollars of revenue goals, not all of that can come from other rich, right? So regardless of what you think, I think what’s important to take away is that we’re gonna be an environment right now where the chance of getting audited is going to be increased than it was in the past.

Gene (01:51):

And you’ve gotta take some steps. So let me give you some advice on avoiding an audit altogether. And at least even if you are chosen for an audit, trying to minimize the cost of doing that. Cause even if you’re doing everything right, it still will cost you administratively if you are chosen from an audit, right? So make sure that you remain consistent on how you categorize your transactions from year to year. Be consistent. Okay, don’t take an expense one year, call it something and then call it something else the next year. Also make sure that you hire an experienced licensed tax professional so that your full return is transmitted, right? I mean, don’t exclude any of the forms and the schedules that are required by the IRS. That kind of a thing, that triggers audits. And that’s something that you definitely want to avoid, right? You also wanna avoid some of the red flags on a tax return as well. Calculation errors, deductions that might be outside of your industry norm, reporting continued losses year after year and failing to…

Gene (02:58):

Timely file your payroll tax returns. I mean, come on guys, right? You’ve gotta file your returns. You’ve gotta pay in your estimated taxes. If you don’t do that as a very limited thing, you’re definitely gonna raise red flags with the IRS and that’s not good. The other thing is keeping really good records. Record retention: It’s critical for businesses of all sizes. The IRS requires taxpayers to keep tax records for at least three years from the date the tax return was filed. If you’re unable to produce a requested document, an auditor may consider this a finding that leads to a negative impact on your audit results. So be aware of that. The other thing is and I hope this is basic information for you: Meet the deadlines. The IRS provides deadlines for supplying documents and information and it’s very important that you abide by those deadlines.

Gene (03:50):

I mean, if you needed additional time to gather those documents, you can ask for an extension but for goodness sake, make sure that you are meeting your deadlines. And I mentioned it earlier as well, but file your returns on time and make sure you’re paying in any estimated payments. Because if you don’t do that, you will be triggering a red flag with the IRS. Bear in mind that, the IRS itself, it’s a government agency. We’re paying the bills for the IRS. So if you don’t agree with the findings of an audit, you still have options, right? It’s not as onerous as you think. If you don’t feel that you’re being treated fairly by the auditor, you can always request a meeting with their supervisor or even appeal any findings that you think aren’t equitable.

Gene (04:37):

The IRS can’t withhold any information. They should be able to clearly explain why you’re being audited and provide the statutes and regulations that you feel you may have violated. Also be aware of your rights as a taxpayer and you can limit the scope of an audit just to the business under an audit. So make sure you pay attention to that it doesn’t expand even wider. And at the completion of an audit, the audit’s gonna present his or her findings. If you disagree with the findings, you usually have a right of appeal. So listen, all of this is the stuff that you should be doing not only to avoid an audit, but also to, if you do get audited to try to minimize the impacts of an audit because the risk of an audit will be going up this year.

Gene (05:21):

Some people might say, it’s not gonna affect people that are making less than $400,000 a year. I have a lot of clients that make more than $400,000 a year that are good taxpayers but they’re reinvesting all their money back from their business. They could be subject to audits and that could be very disruptive to their business. So they have to make sure that they’re taking these cents. There’s no guarantee of avoiding an audit guys. Even if you do all the right things, these audits are randomly selected. They can be triggered by a red flag on your return or initiated by a simple mistake that prompted additional…

Gene (05:57):

Questions. You might do everything correct and still get audited. So be prepared for that, particularly now, because the risk of that audit is going to be increased even more. Hope this information helps. My name is Gene Marks. You’ve been listening to The Small Biz Ahead podcast. Hey, if you need any advice or tips or help running your business, visit us at SmallBizAhead.com or SBA.TheHartford.com. Thanks for listening. I will be back with you next week with another tip to help you run your business. You take care.

Download Our Free eBooks

Leave a Reply

Disclaimer: Comments are subject to moderation and removal without cause or justification and may take up to 24 hours to be seen in comments. Your email address will not be published. Required fields are marked * Please do not include personal policy information; if you have questions or concerns regarding your policy with The Hartford, please log into your account or you can speak directly to a Customer Service Representative.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.