The Service has developed a new audit guide for the business consulting industry. It instructs examiners on what issues to look for, such as bartering on the Internet, employee or independent contractor classification, and improper shifting of income to a related firm. They will check if a business is a personal service corporation that is taxed at a flat 35% rate (C-Corp reported on an 1120) .
Agents also will review write-offs for meals, travel and entertainment to see if they’re business-related and meet the substantiation rules. Expense reimbursements will be eyed to verify that they were properly accounted for. These are typical audit items for most business audits.