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...

School tax breaks get House support as Democrats objectRichard Rubin of Bloomberg reported that the House of Representatives on Thursday voted to expand and simplify tax breaks for education as Republicans continue to pass...
Many senior US tax professionals believe that a streamlined audit process will be the top benefit resulting from the IRS Transfer Pricing Audit Roadmap, a new toolkit organized around a notional 24-month audit timeline,...
Tax accounting to be simplified for money-market fundsThe US Securities and Exchange Commission (SEC) voted 3-2 on Wednesday for sweeping changes to institutional money-market funds, Emily Chasan, senior editor of...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.