IRS Targets Consultants

The IRS has recently published a new audit techniques guide designed to help auditors in their examinations of individuals who work as consultants and businesses that hire consultants. The IRS is encouraging audits of these people and entities.

In particular, the tax returns of individuals who work as consultants will be scrutinized to determine if unwarranted expenses are being deducted for business travel and to see if there is an attempt to separate personal and business travel expenses.

Tax returns of consultants will be examined closely for proper classification of meals expenses. If there is an expense for business travel, it follows that there should be a meal expense deduction as well. The limitation on the amount of meal expenses that can be deducted must be applied to meals purchased while the taxpayer is traveling, and the IRS will be checking to make sure this calculation is being made properly.

Businesses that hire consultants will be examined to determine if the consultants are actually employees who should be subject to tax withholding by their employers. Special notice will be taken of former employees who return to a place of business as consultants, and to consulting fees paid on a continuing basis to the same individual(s).

See a recent AccountingWEB article for more information on how to determine if a consultant is a free-lance contractor or an employee.

You may like these other stories...

As anyone who's ever been through a divorce can attest, the pain of parting with your spouse isn't just emotional—the fallout from divorce can wreak financial havoc as well long after the dust in the courtroom...
Former DOJ Tax Division head Kathryn Keneally joining DLA Piper in New YorkGlobal law firm DLA Piper announced on Thursday that Kathryn Keneally, the former head of the US Justice Department Tax Division, is joining the firm...
OECD calls for coordinated fight against corporate tax avoidanceDavid Jolly of the New York Times reported that dozens of countries with the most advanced economies have agreed on principles for concrete action to prevent...

Already a member? log in here.

Upcoming CPE Webinars

Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 21
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.