Small-business tips: IRS liaison meeting covers tipping, auditing and litigation.

• Author: Spaniel, Bill

The IRS has a major effort under way to educate new small businesses about tax laws. The program focuses on four areas:

* Avoidance of tax schemes, including not withholding income taxes from wages paid to employees;

* Increasing e-filing and decreasing the number of re-submissions-e-filing the same form more than once because of unfamiliarity with the proper process or accidentally hitting the "send' button;

* Taxpayer burden reduction; and

* Voluntary agreements.

This push by the IRS was just one of the topics discussed at the CaICPA Committee on Taxation's annual IRS liaison meeting in Los Angeles in November. The meeting included 12 IRS representatives, who reviewed policies and responded to questions.

Because Congress has requested 80 percent participation in e-filing by 2007, the IRS is encouraging CPAs and enrolled agents to file more returns electronically, said Art Hylton, an IRS area director for taxpayer education and communication.

Even if paper returns are filed, e-filing can be used to request the first extension, Hylton said.

However, the system only can receive paper requests for a second extension, but the IRS is upgrading its technology so all extension requests can be filed electronically.

As for taxpayer burden reduction, Hylton said, "We hope to make recommendations to headquarters about what needs to be changed."

If you have a comment or suggestion, contact Hylton at (213) 576-3032. The information will then be forwarded to the new Office of Taxpayer Burden Reduction.

Hylton noted that as part of the IRS tip rate determination and education program, the IRS is encouraging members of the food and beverage industry to comply with voluntary agreements for tip reporting.

Those agreements include educating employees to report all tips to their employers, establishing tip reporting procedures involving written statements and requiring employers to observe compliance requirements.

For more details, visit www.irs.gov/ businesses /small/article/id=98944,00. 00. html.

Auditing Priorities

Peggy Rule, an area compliance director for small business and self-employed (SB/SE), said the IRS's top auditing priority is abusive schemes and that the IRS "will ride those cases in which we started to litigate."

Among the schemes the IRS is targeting are those seeking to reduce liability by inflating expenses, slavery reparation claims and abusive shelters and trusts.

Other auditing areas the IRS will focus on include:

* Offshore credit...