How To Reduce Your Risk Of An IRS Audit: just one of the many topics covered in the January ‘24 Performance Coach Retreat
The IRS is hiring tens of thousands of new agents — thats a fact. What simple dentist’s can you do to reduce your chance of being audited.
Somewhere between 37,000 and the much reported 87,000 are being hired and are focusing on corporations and professional corporations, dentists, and will result in increase audits.
One of the things the IRS uses to determine if they should look further into your returns is a DIF score. The Discriminant Function System (DIF) score rates the potential for significant change, based on past IRS experience with similar returns. It means they compare your return against what they deem as the industry standard for a variety of areas. If you have too many areas out of their range, then you will go into a pool for closer inspection and potential audit. As artificial intelligence makes it’s way into the world of accounting, look for increased returns to be examined for irregularities.
You and your accountant should evaluate your statistics based on what your industry standards and make sure that if you are outside those standards you have proper documentation, have reviewed the variances and are comfortable showing more than those amounts.
How simple paperwork can trigger an audit
The IRS is looking for low hanging fruit, simple mistakes or irregutlatires on returns. They are looking closer at people making over $100,000, have high DIF scores, and sloppy returns. An example of a sloppy return would be if there are discrepancies between documentation such as a W-2 having information that doesn’t match a 1099 they have on file. Remember, they have a copy of all those 1099’s. Make sure you are using the right information when filling them out and receiving them.
Examine your 1099’s when they come in from insurance companies, and other sources. 60% of the time, these discrepancies are what triggers an audit. Something as simple as a 1099 having a doctors social security number rather than the EIN may be the culprit.
The Schuster Center for Professional Developments (SCPD) core program helps the doctor create systems to accurately account and determine expenses, revenue and calculate net profit. In short, SCPD is the first and only business school for dentists. SCPD assists the doctor in developing and implementing a practice philosophy, a vision and mission for the practice, and then through in-person, live virtual and virtual leaning modules, our coaches help the doctor and team develop a practice that creates stewards of the employees resulting in much less time spent on management.
Take the case of one of our doctors reporting that before the Center, the practice was so busy, she was booked out 4-6 months and she didn’t like numbers or the management of the practice, didn’t really know what her overhead was and relied on the accountant to tell her that stuff. Today, she has transitioned out of managed care to fee-for-service care, is working less, making $13,000 more a month, and knows exactly how much profit there is, knows her true overhead (not what the accountant told her it was) and has confidence in the management of her practice, allowing her to focus on her patients during the 3 1/2 days a week she has blocked for patient care.
If you would like to discuss your situation with one of our coaches or have a strategy call with Dr. Edwards write Chris@cfpd.com or use the following link https://my.timetrade.com/book/