Beware new audit threat; IRS aiming low — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Heads up: The IRS plans to ratchet up the audit pressure on small businesses in the coming months.

Why? It believes that noncompliance is higher among small firms than larger ones, especially with employment taxes. One target: S corporation owners who take artificially low salaries in order to receive dividends. (The dividends aren't subject to employment taxes.) The agency also plans to crack down on nonfilers and situations in which taxable income is disguised as tax-free fringe benefits.

Tax cuts on the shelf. In warning Congress last month about the economic danger of the rising budget deficit, Federal Reserve Chairman Alan Greenspan said for the first time that he believes tax increases will be needed to trim the deficit. That will dampen Republican efforts to make permanent President Bush's earlier tax cuts, which are set to expire in coming years. It also reduces the likelihood that the Senate will go along with the House's recent vote to abolish the estate tax. The Senate may agree to permanently increase the estate-tax exemption to between $5 million and $10 million.

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