• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

CMR Associates - Tax | Accounting

  • Home
  • Services
    • Tax Accounting
    • Business Accounting
    • Remote CPA Staffing
  • Industries
    • Real Estate
    • Doctors
    • Restaurants and Hospitality
  • About Us
  • Contact Us
  • Book Appointment
  • Publications
You are here: Home / Small Business Tax Advice / Businesses can utilize the same information IRS auditors use to examine tax returns

Tax Accounting and Business Consulting

Businesses can utilize the same information IRS auditors use to examine tax returns

CPA Business and Personal Tax Expert - Business Tax Audits

Businesses can utilize the same information IRS auditors use to examine tax returns

The IRS uses Audit Techniques Guides (ATGs) to help IRS examiners get ready for audits. Your business can use the same guides to gain insight into what the IRS is looking for in terms of compliance with tax laws and regulations.

Many ATGs target specific industries or businesses, such as construction, aerospace, art galleries, child care providers and veterinary medicine. Others address issues that frequently arise in audits, such as executive compensation, passive activity losses and capitalization of tangible property.

How they’re used

IRS auditors need to examine all types of businesses, as well as individual taxpayers and tax-exempt organizations. Each type of return might have unique industry issues, business practices and terminology. Before meeting with taxpayers and their advisors, auditors do their homework to understand various industries or issues, the accounting methods commonly used, how income is received, and areas where taxpayers may not be in compliance.

By using a specific ATG, an auditor may be able to reconcile discrepancies when reported income or expenses aren’t consistent with what’s normal for the industry or to identify anomalies within the geographic area in which the business is located.

For example, one ATG focuses specifically on businesses that deal in cash, such as auto repair shops, car washes, check-cashing operations, gas stations, laundromats, liquor stores, restaurants., bars, and salons. The “Cash Intensive Businesses” ATG tells auditors “a financial status analysis including both business and personal financial activities should be done.” It explains techniques such as:

  • How to examine businesses with and without cash registers,
  • What a company’s books and records may reveal,
  • How to analyze bank deposits and checks written from known bank accounts,
  • What to look for when touring a business,
  • Ways to uncover hidden family transactions,
  • How cash invoices found in an audit of one business may lead to another business trying to hide income by dealing mainly in cash.

Auditors are obviously looking for cash-intensive businesses that underreport their cash receipts but how this is uncovered varies. For example, when examining a restaurants or bar, auditors are told to ask about net profits compared to the industry average, spillage, pouring averages and tipping.

Learn the red flags

Although ATGs were created to help IRS examiners ferret out common methods of hiding income and inflating deductions, they also can help businesses ensure they aren’t engaging in practices that could raise audit red flags. Contact us if you have questions about your business. For a complete list of ATGs, visit the IRS website here: https://bit.ly/2rh7umD

Filed Under: Small Business Tax Advice

Primary Sidebar

About Us

Covington CPA and Tax Accountants Team

Tax Accounting and Business Consulting: We provide tax accounting, payroll, 401(k), business

Outsourced Staffing

CRAF.IO Accounting Outsourcing

CRAF.IO provides direct hire remote accounting staffing services. For more information, visit https://craf.io/

TAX NEWS AND ADVICE

  • Individual Tax Advice
  • Personal Finance
  • Small Business Tax Advice

Footer

Company Profile

CMR Associates provides tax accounting, payroll, 401(k), business valuation, consulting, and financial planning services.

Serving clients throughout the country, we embrace distributed work environments.

Terms and Conditions
Outsourced Accountant CPA
All the Presidents’ Taxes

Accounting News and Updates

  • What Silicon Valley Bank’s Failure Can Teach Us about Personal Financial Planning
  • How to Maximize Your Tax Refund for 2022
  • Want to Save Taxes? Maximize Deductions and Use the S-Corp Structure
  • IRA account value down? It might be a good time for a Roth conversion
  • Understanding and controlling the unemployment tax costs of your business
  • Watch out for tax-related scams
  • Setting up a Health Savings Account for your small business

Write or Call Today

CMR Associates, LLC
207 E Gibson St
Covington, LA 70433

(888) 530-5630
office@cmrtax.com

© 2023 · Sitemap·