Slower Processing Times: Expect delays in processing tax returns, especially for paper and amended returns. Refunds could take longer than the typical 21-day target for e-filed returns.

Reduced Customer Service: Reaching the IRS by phone or in person may become more difficult, with longer wait times.

Extended or Delayed Audits: Audits may take longer or be reassigned without notice due to staffing issues.

Shift in Audit Focus: Fewer overall audits, but increased focus on complex or high-value cases.

Business Delays: Businesses may experience delays obtaining IRS documentation needed for transactions.

Yes! In fact, most audits are initially conducted by computer algorythims, not by humans. Below are some specific applications:

• Risk Scoring: Uses algorithms to score returns for audit potential.

• Data Matching: Compares return data with third-party info (e.g., W-2s, 1099s).

• Predictive Analytics: Detects patterns associated with fraud or noncompliance.

• Computer Audit Specialists (CAS): Analyze automated systems during audits.

• Target Areas: Includes large partnerships, crypto, foreign assets, and employment taxes.

• EFTPS Monitoring: Early alerts for discrepancies in reported income or deductions.

• Installment Agreements: Pay over time through a monthly plan.

• Online Payment Agreement: Quick setup for payment plans online.

• Offer in Compromise (OIC): Settle your debt for less if you qualify.

• Currently Not Collectible Status: Temporarily delays collection efforts due to financial hardship.

Pass-Through Taxation

• LLC & Partnership: Income passes through to owners’ tax returns.

• S Corp: Same as above but with more formal structure.

Self-Employment Taxes

• LLC: All earnings usually subject to self-employment tax.

• Partnership: Active partners pay self-employment tax on income.

Payroll Taxes (income, FICA, etc.)

• S Corp: Salary subject to payroll tax; distributions are not. Shareholder owners must be paid a wage (i.e., w-2 payroll); medical and retirement are reported on w-2

• C Corp: Salary subject to payroll tax; fringe benefits (medical, etc.) are not taxed

QBI Deduction (20%)

• All but C Corp structures qualify.

Deducting Losses

• Partnership: Can include funds borrowed by partnership in basis, but cannot lend money to partnership.

• S Corp: Shareholders may lend money to their company; must track basis.

Flexibility and Restrictions

• LLC & Partnership: Flexible profit/loss allocation.

• S Corp: Must follow ownership percentages; capped at 100 shareholders, one stock class, and cannot include foreign shareholders

PTE (Pass-Through Entity) Tax Election

• Available to S Corps and Partnerships for deducting state taxes at the entity level