Hows about the IRS audit themselves. Seeing that they are one of the more inefficient branches of our buracracy

I'd be more scared if I knew what that meant.

/didn't RTFA

What in blue hell is an S corporation?
/not an economics geek
//I RTFA

IRS took 2 years to do my 501c3... I thought Bush was going to dismantle the IRS. (one of his few good ideas)

They are going after small businesses and freelancers.... hope you've got 7 years of reciepts..

arched
Ok, now it makes sense... sort of.
/why aren't they going after the huge-ass tax evading corps?
//whatever chapter that is

The IRS is government sanctioned organized crime.

Headline is wrong; they already audit S corps., but they're going to start doing more of them.

I'm in the mood to be picky.

People are blowing this way out of proportion. It looks like the audit's primary purpose is to see if tax law needs to be changed. Yes, tax evaders are going to be caught in the process, but I doubt, given that it's primarily a fact-finding audit, that they're going to come down really hard on people who made some minor mistakes.

Of course, I also think the general hatred of the IRS is generally stupid. They only audit you based on the deductions you take. If you take a deduction without being able to provide proof of it, then yes, you're going to get smacked. Don't want to take the risk? Then either keep the important receipts or don't take the deduction.

Seems like a half-assed attempt for them to try and find loopholes that small corporations use and close them.

Here's the whole problem in a nutshell:

The service is checking, for instance, whether employee shareholders are forgoing a salary or reporting artificially low pay in favor of a big dividend. It's also looking into whether employees are doing such things to reduce or to eliminate self-employment taxes; such practices are illegal

They set up absurdly complex rules and then when big opportunities to "game" the system to your advantage are inevitably found, they make another rule saying "you can't follow some of these rules for the express purpose of benefitting yourself".

But of course the whole reason for the outrageous complexity is to influence the behavior of taxpayers. These ass-covering "Whoops, that wouldn't be fair, now would it" blanket rules prove that the system is broken.

I just filed my final paperwork for 2004. Took a while to finalize some transactions that were structured for nothing other than minimum tax impact. That's ridiculous.

Oh phew. It's a good thing that multi-billion dollar corporation I own is a Subchapter F.

Subchapter S???

Good. Maybe they'll go after those farkwads who illegally used Bush's "buy the rich an SUV" tax break.

The whole idea is, be as straight as possible with them.

They're not there to hurt you, they're there to help. In
going after the freeloaders (that includes illegals), they're
actually lowering your taxes overall.

/my $0.02, less state and federal tax

Subchapter S corporations are created similar to regular corporations, but have strict requirements that allow them to be treated separately for tax purposes. You have to make an election to receive the special status.

there is a limit to the number of shareholders you can have (100, i believe), you can't have an alien or a corporate shareholder.

The key advantage is that you only get taxed once instead of twice on gains. Which is why I'm guessing they are getting audited.

/Remembers something from business organizations!

Good thing I keep my books well.

/incorporated as an S last year

jpboaty:

They're not there to hurt you, they're there to help.

Anyone who takes my money at the point of a gun is not here to help.

Feh, I really don't get why this is a big deal. Maybe these Subchapter S's should just be keeping records like they should, that should've already been obvious.

most sub-s are owned by one person for two reason. flow-thru taxes and limited liability the corp status gives. IRS auditing them more really is not new.

This headline makes about as much sense to me as Paris Hilton's rise to fame.

/very little

The IRS plans to examine later this year 5,000 randomly selected S corporation returns from the 2003 and 2004 tax years, the wire service reported. The agency expects to finish the audits within two to three years.

Of course, Bush want's to create a diversion with the results...

Where do these places come up with names? 'C Corporations' 'sub-chapter S corporations', calling tax forms 501x72c, etc..
Here in Australia, theyd be called 'small business' 'large business' 'charity' and 'tax return'...
as complicated as those names may be for folks unfamiliar with our economy/tax system may be, it works for us

What's all this talk about saving your receipts? I was under the impression that if you're suspected of a crime, it was the *government's* burden to prove you guilty. Not being able to prove your innocence isn't required.

This is BS. They are indeed targeting us small family-owned businesses.

I am president of an S-Corp, an entity formed to protect my family and our property in the event of a lawsuit against our business.

I work part time towards the business, therefore the company pays me a part time salary, but do indeed get dividends and dispersements from the business occasionally (its my business, of course I'm going to take all the profits after the bills are paid). This reduces FICA and other taxes. Its the only real tax break we're able to get, since this country's government does nothing to help small businesses get off the ground and stay in the black.

I'm sure I'll be talking to my accountant about this, but it sounds like they're going to start cracking down on this sort of thing.

Empower the big class-C corps, stomp on the little guy.

vgss

with the irs...you are guilty until proven inocent...and you have to prove it.
/hates the irs
////love slashes

scuffer

Spend a few years as an accounting major, and you'll find CPA's are very protective of their trade. They constantly increase the requiements to become one, and to continue to be one. Keeping tax code complex and confusion is in a way a very self-serving attempt to keep their services in need. Not that CPA's directly write tax laws, I'm sure a majority of the folks writing tax law are.

Call it job security.

I submitted this with a funnier headline.

What is with all the IRS hatred? If you cheat on your taxes, I hope you get audited, busted and pay a hell of a lot more then you originaly owed. People who cheat on their taxes just raise the tax burden on honest Americans like me.

If you think tax laws are too complicated and can't be bothered to keep your books properly, don't take strange deductions or file as special classes. Better yet, lobby your elected representatives to simplify the tax code. The IRS is just doing its job, enforcing the law.

I'm a liberal, but if George Bush wants to try and simplify the tax code, god bless him.

vgss
What's all this talk about saving your receipts? I was under the impression that if you're suspected of a crime, it was the *government's* burden to prove you guilty. Not being able to prove your innocence isn't required.

Unfortunately, you don't go to the regular court system. You enter a twilight zone known as "IRS Court". There, you have limited rights, to put it politely.

This is the biggest reason to get rid of Federal income tax and to replace it with something else that is less arbitrary in its interpretation - like a national sales tax.

You don't have to cheat on your taxes (I don't) to resent an organization and government that gives all the breaks to the big corps, but continues to tighten the reigns on the small guy, doing an honest days's and trying to make something more of themselves.

What is with all the IRS hatred? If you cheat on your taxes, I hope you get audited, busted and pay a hell of a lot more then you originaly owed. People who cheat on their taxes just raise the tax burden on honest Americans like me.

If you think tax laws are too complicated and can't be bothered to keep your books properly, don't take strange deductions or file as special classes. Better yet, lobby your elected representatives to simplify the tax code. The IRS is just doing its job, enforcing the law.

Worst. Morals. Ever.

So, the law is unjust, but you hope those who break it get punished, simply because it makes your life slightly more difficult?

Bet you were a fine tattletale in grade school...

iccky

and all of those who run our own business hope YOU oneday start your own and finaly see what the irs really is....a government approved maffia.

That is, of course, if you arn't too scaried to run your own business, but you probably are.

(smacks head) dang it!....close tags are a good thing!!1

"doing an honest days's and trying to make something more of themselves."

Uppity peasant...get back out there and generate some shareholder value...you only deserve wealth if you already have it!

First, America's record surplus was given to the wealthy as tax breaks. Later, a form of bankruptcy protection was removed for the middle class, but retained for wealthy companies. Now we are hiring extra tax auditors to go after small businesses (but offshore tax shelters for the wealthy are still legal).

How Republican.

It always amazes me to see folks get up in arms about stuff like this. If you're not keeping your receipts, then you are going to get hammered if you get audited. And if you don't understand that, then you shouldn't be running a business.

I run a small business (sole proprietorship), and because I took a large loss on my income last year, I'll probably get audited. And, amazingly enough, I did the incredibly complex and difficult job of.. *gasp*.. keeping receipts for my deductions and expenses!

iccky:

Unfortunately, you can keep all of your records in perfect condition and pay every penny you could conceivably owe. That won't save you from the IRS.

A few years ago, the IRS misconnected the tax ID of my subchapter S corporation with the records of another company. We dutifully sent in copies of everything that was requested. It took three years, thousands of dollars, and at least dozens of hours to sort out their snafu. Eventually, they admitted their mistake, failed to apologize, and moved on to some other PDB.

A couple of years later, their "fix" broke and we went around the same carousel again. It's been ten years now but I would still like nothing more than to see every IRS employee out on the street looking for honest work.

The U.S. tax code is 55,000 pages long. How can anybody know it very well? The congress loves this tax code because it gives them the power to micro manage U.S. society.
55,000 pages!

(but offshore tax shelters for the wealthy are still legal).

You do not have to be wealthy to use offshore accounts. Google is your friend

Unavailable for comment:

mr lawson pretty well explains the why you would want to be chapter S. All too often the audits turn into witch hunts on petty issues and during that time you have to address the IRS complaints and not run your buisness.

The amount of time and money that a buisness owner has spend to document everything and fill out forms is reduculous.

You have to have a good accountant because in order to be able to learn all the rules and regulations would require you to become a CPA. You are not a CPA, you have your own buisness.

Then you live in fear that you did not fill out the right form at the right time for the right amount.

In addition, you have to keep track of not only your buisness income taxes, but you have to keep track of medicare, medicaid, social security, state income taxes, local income taxes, and unenployment. Then multiply that by two for each employee as you have the withholding amount and you have the employer "contribution"

Do you know how much more you would have in your pocket on payday if all this crap was eliminated? At least 30%! How would you like an instant 30% raise? Plus your employer could even pay your more because you would not have the employer "contribution" part!

Look at your paycheck sometime and look at all the stuff that is being taken out. That is YOUR MONEY! You worked for it. You earned it! It is YOURS!

You have nut cases in Washington DC and your state capitals that have decided it is their money and they are using it to pay for things like studing the sex life of rats and pork barrel projects that only help their local constituants! People in Georgia should not be paying for skating rinks in California. People in Texas should not be paying for senior citizen centers in Georgia (The former were two actuall bills that got passed in DC)

If the money goes to DC it should only pay for items that effect the entire country, example defence....actually I cant come up with much more that DC should be addressing! (Dont start with a flame war right now about Iraq. Debate that at a differnet time. I am talking about some group attacks the US and we MUST respond)

Pardon my digression. Back to my original rant.

BTW: The more time and money that the buisness owner uses to document all this tax crap and having to act as an agent for the IRS* means that much less money he spends on hiring employees. Think about that for a minute.

*If you are collecting taxes from your employees you are a tax collector. An agent for the IRS.

No more IRS. See http://www.fairtax.org.

And if you don't understand that, then you shouldn't be running a business.


Damn straight! and probably won't be running one for very long...:-) Audit or not.

This isn't a matter of keeping receipts, there's a lot more to filing a S-Corp return than keeping receipts.

The real issue I see here is payroll. I pay myself about 1/2 the typical network admin's salary, because I work about half time towards the comapny. I don't work the other half the time (I spend it with my family or on Fark).

To generalize, the end of the article makes it sound like the IRS is going to start cracking down on self-paid salaries, and for example, say that I should be getting full-time salary, and that I'm under-reporting my salary to avoid self-employment taxes. Say bye-bye to thousands of dollars that could have gone towards my kids' college fund.

"The service is checking, for instance, whether employee shareholders are forgoing a salary or reporting artificially low pay in favor of a big dividend. "

That sounds well and good. However, if you read the IRS rules governing Sub-S's and shareholder salaries, you'll find they are very vague.

Being a sub-S isn't the great thing that most people think it is. At the end of your fiscal year you get to pay your taxes on both your income and your corporate profits, plus you get to make your quarterly tax deposits. Hopefully you've got enough cash reserves to do both. Whatever is left over can be used to expand your business.

The IRS needs to be abolished. Boortz is right.

Getting rid of the IRS is good, but taxes will still have to be paid.