Though the days are getting shorter and the weather is taking a turn, there are some great revenue reasons to get excited about the next two months.
As we round the bend into Black Friday territory (which for many began at the end of October), it’s time to get nimble with your business plans. We all know the power of the holiday season for boosting sales — revenue-increasing opportunities abound. Even if your business isn’t centered on retail, are there offers you can create to capitalize on Black Friday?
Finding ways to boost your revenue should have you jumping on seasonal moments in addition to careful planning and execution of your business goals.
For you as a business owner, besides jumping on opportunities, you’ll also want to stay abreast of things that might affect your business with Uncle Sam.
While there have been some good developments from the IRS with regard to Skagit County businesses like yours (primarily the business accounts option), there are also the negative implications of a more concerted effort by the IRS to collect unpaid taxes.
But, even as I write today’s note on new moves coming from the IRS, the House passed legislation recently that would nix IRS funding for most of it. But if the funds stay in place, which is very possible considering the Senate’s bent toward shutting it down (and a presidential veto if not), here’s what’s coming…
Partnership Income Tax Returns & More Skagit County IRS Targets
“The best way to maximize your wealth is through legal and ethical means, which includes proper tax compliance.” ― Warren Buffett
The IRS has been making plans to expand its tax compliance efforts since they received new funding in August of last year. You might have heard about their new tax targets and started to worry as a business owner. So I’m going to break it down for you today so you know what exactly they’re going to be looking for.
The IRS will be focused less on working-class taxpayers and increasingly toward high-income individuals and corporations. Why? Because these groups have seen sharp drops in audit rates during the past decade.
Specifically, that means high-income earners, partnership income tax returns, large corporations, and promoters “aggressively peddling abusive schemes.”
“This new unit will leverage Inflation Reduction Act funding to disrupt efforts by certain large partnerships to use pass-throughs to intentionally shield income to avoid paying the taxes they owe,” said IRS Commissioner Danny Werfel.
Pass-through entities
That “new unit” tasked with these specific targets is in the IRS’s Large Business and International Division. They’re keeping an eye on the use of big, intricate pass-through entities like S corporations and partnerships that are being intentionally used to dodge paying income taxes on their returns.
Some history on this…
The Bipartisan Budget Act of 2015 brought about significant changes in how the IRS handles partnership income tax returns. It placed a spotlight on partnerships that have non-individual entities as owners and introduced an option for smaller partnerships to opt-out.
When people in my line of work saw this kind of transformation in governance, many of us anticipated that there would be increased attention on larger and more organized partnerships, and here it is.
High net worth individuals
Specifically, this means taxpayers who earn over 1M and owe more than 250K in taxes. It’s a targeted approach based on their past success, where they managed to collect a substantial 38M from 175 high-income earners.
For fiscal year 2024, the IRS has assigned a dedicated team of revenue officers to handle these high-end collection cases. The IRS plans to expand their efforts by reaching out to approximately 1,600 taxpayers in this category, all of whom owe hundreds of millions of dollars in taxes.
FBAR violations
The IRS says high-income taxpayers across the board have been using offshore accounts to dodge disclosing their earnings (and the associated taxes).
If you’re a US citizen with a financial interest in a foreign bank account, you need to file something called an FBAR (Report of Foreign Bank and Financial Accounts). This is required if the total value of all your foreign financial accounts adds up to more than $10,000 at any point in time.
After digging into years of filing data, the IRS has spotted hundreds of potential FBAR non-filers — folks who seem to have not reported their foreign accounts, and on average, they have a hefty 1.4M in those accounts.
In response, the IRS is gearing up to audit the most serious cases of potential FBAR non-filers in the upcoming Fiscal Year 2024.
All of this is still in the formal stages of development. Staffing for these efforts will be the biggest challenge for the IRS (3,700 is the number of skilled staff they want to hire). But it has begun, and that’s why I’m sharing these updates with you.
My clients have nothing to worry about, but if you want to talk about how all of this might impact you or your Mount Vernon business, reach out:
app.acuityscheduling.com/schedule.php?owner=19530343
Looking out for you,
Steve Padgett