England 12/08/2013 – Over the past couple of weeks, thousands of small US business owners have received letters from the IRS.
The internal revenue service is asking them whether they have underreported their business income. It is believed that all kinds of businesses in the USA failed to report the majority of their cash sales in order to minimise their tax bills, and the IRS is determined to crack down on this practice.
Amongst small business owners, these letters have caused considerable alarm. The Wall Street Journal reported, Tom Reese, the owner of Hearing Well Inc, which sells hearing aids in eastern Tennessee, as saying “There’s an emotional thing when you get a pretty ominous-looking letter from the IRS, [saying] you might have done some bad things,”. He has worked hard with his accountant to follow the law, but is still worried about receiving such a letter.
To date, only 20,000 of these letters have been sent out to small business owners. However, many are anticipating that by the time the IRS have finished this particular campaign millions of US businesses will have been contacted.
Exactly which businesses are being targeted by this campaign is difficult to determine. However, many speculate that the IRS is primarily looking at those businesses whose US tax returns include very few, if any, cash receipts. Many believe that this is what alerts the IRS to the fact that a business might be underreporting. Of America’s $450 billion tax gap it is believed that $376 billion is down to under reporting.
Americans living abroad could also be affected
Some of these letters will even end up going to Americans living abroad. Americans who still own small businesses which are operating in the US, may also be contacted by the IRS. The fact that all Americans have to declare their income regardless of whether or not they still live in the US means that the IRS already has most of their addresses on file.
Firms like US Tax & Financial Services, who deal with the tax matters of American citizens who live abroad, expects to see many of these letters over the coming months.
Contact:
US Tax & Financial Services Ltd
(London Office)
Magdalen House, 136 Tooley Street
London, UK
Zip: SE1 2TU
Tel: +44 20 7357 8220
Email: enquiries.uk@ustaxfs.com
Web: www.ustaxfs.com/