The IRS has issued a new Audit Technique Guide (their guidebook for conducting audits) and told auditors they need to focus on this group.
Who is in the crosshairs now? Grocery stores, ecommerce businesses, food trucks, auto dealers, gas stations, auto body shops and liquor stores. Any retailer, for that matter, but those are ones that the IRS has specifically called out.
Two big items they’re going to watch are “underreported income” and whether cost of goods sold is properly reported specifically in relationship to how inventory is accounted.
Other specific items that the IRS is watching are depreciation, cost segregation studies and deducting expenses for retail stores. Of these, cost segregation studies surprises me the most. I generally associate cost segregation studies with real estate, but it sounds like someone has been taking advantage of the studies for retail outlets.
If you get an IRS notice, talk to a tax expert before you call the IRS. The auditors are trained to get a lot of information in that first call and that’s when taxpayers are most likely to get in trouble. We have experts in IRS and state tax negotiation. If you need help, Contact Us.