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Tax audits: Follow the electronic trail

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in Small Business Tax,Small Business Tax Deduction Strategies

The IRS is “getting smarter” in its old age. It is using a new technologically based audit technique for businesses with electronic records.

Essentially, the IRS has authorized its agents to access metadata that can indicate how and when a company’s records were created and if any revisions have been made. (Office of Chief Counsel Memorandum, No. 201146017, 11/18/11) The information, especially as it relates to changes in the records and the nature of those modifications, could help IRS examiners uncover fraud.

Classic example: Reductions of taxable income or increased deductions without any corroborating evidence will look suspicious.

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