What Do Small Business Owners Need to Know about the IRS's New Fraud Enforcement Office?

The Internal Revenue Service (IRS) has formed a new Fraud Enforcement Office that will share responsibility for targeting tax fraud in the small business sector. In a March 5, 2020 statement announcing the creation of the Fraud Enforcement Office, the IRS wrote that the new office (which is housed within the Small Business/Self Employed Division) will work, “in support of IRS efforts to detect and deter fraud while strengthening the [IRS’s] National Fraud Program.”

For small businesses in Boston, this is an important development that demands attention. The Small Business/Self Employed Division has oversight of more than 57 million individual and corporate taxpayers; and, despite this extraordinary number, it has still managed to audit and investigate a significant number of small businesses each year. With the Fraud Enforcement Office focusing on small business tax fraud specifically, local businesses can expect to face even greater scrutiny in the years to come, and this will make it particularly important for them to assess their risk with the help of an experienced Boston tax attorney.

5 Key Facts about the IRS’s New Fraud Enforcement Office

1. It is Housed Within the IRS’s Small Business/Self Employed Division

As mentioned above, the Fraud Enforcement Office is housed within the IRS’s Small Business/Self Employed Division. This is noteworthy because it indicates that the Fraud Enforcement Office is dedicated to enforcing tax compliance among small businesses, including:

• Part-time and start-up businesses
• Small businesses with no employees
• Small businesses with only a few employees
• Single-owner limited liability companies (LLCs) and corporations
• Businesses with assets of less than $10 million

2. It is Focused on Targeting Small Business Tax Fraud

Specifically, the Fraud Enforcement Office will be targeting small businesses suspected of engaging in business tax fraud. This includes both intentional and unintentional reporting and payment deficiencies.

3. It is Ramping Up its Enforcement Efforts in 2020

According to the IRS, the Fraud Enforcement Office will begin heavily investing its resources in targeting small business tax fraud in 2020. This aligns with the IRS’s broader Fraud Policy initiative to crack down on individual and corporate tax fraud this year.

4. It Will Be Investigating Civil and Criminal Tax Fraud

The Fraud Enforcement Office will be conducting and participating in audits and investigations targeting both civil and criminal tax fraud. It will be coordinating with the IRS’s Criminal Investigations (CI) division as necessary in addition to working with, “civil-side revenue agents and revenue officers [and] external partners.”

5. It Will Be Pursuing Substantial Penalties for Tax Reporting and Payment Violations

In appropriate cases, the Fraud Enforcement Office will be pursuing substantial penalties against small businesses (and their owners, as warranted). In order to avoid steep interest and fines, small business owners will need to executive proactive defense strategies based on the advice of experienced tax counsel.

Contact the Boston Tax Attorneys at Thorn Law Group

Are you concerned that your small business (or you personally) could be at risk in the event of a Fraud Enforcement Office audit or investigation? To speak with one of our experienced Boston tax attorneys in confidence, call Attorney Kevin E. Thorn, Managing Partner, Thorn Law Group at 617-692-2989, email ket@thornlawgroup.com or tell us how we can reach you online now.