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Department Of Revenue To Combat Fraudulent Business Tax Filings

Last updated on Friday, January 19, 2018

(INDIANAPOLIS) - The Indiana Department of Revenue (DOR) now has the ability to audit small business owners suspected of claiming fraudulent business expenses, thanks to a collaborative partnership with the Internal Revenue Service (IRS).

Businesses with an individual owner, known as sole proprietorships, may be required to fill out a 1040 Schedule C tax form as part of their federal income taxes. The Schedule C form lists all income, expenses, costs of goods sold and vehicle information, as a step to determine their federal gross income. The federal gross income is then reported to DOR when filing state individual income tax forms.

In a joint effort to combat fraudulent business expenses, the IRS is sharing filed information with DOR to evaluate any suspicious information and irregularities--a new development for the 2018 tax season.

"DOR has been cultivating this partnership with the IRS in recent years to make sure Indiana's taxpayers are fulfilling their tax obligations, which benefits all Hoosiers," said DOR Commissioner Adam Krupp. "DOR's collaboration with the IRS is essential to ensuring taxes are appropriately collected and distributed in a fair and efficient manner.

"By evaluating and detecting incorrect income reporting at both the state and federal levels, DOR and the IRS can collect what is due and benefit all taxpayers."

Those most affected are mainly at-home businesses, which include more than 260,000 Schedule C filers living in Indiana. These businesses are advised to always keep detailed records of all purchases supporting legitimate business expenses--including all receipts for income earned, invoices and other important documentation supporting the Schedule C claims.

"With at-home and direct marketing businesses becoming a growing industry, those individuals starting a sole proprietorship need to be sure to keep detailed records of all transactions to ensure that if audited, documentation can be easily provided," said Commissioner Krupp.

For those filings appearing to lack or include incorrect information, an audit will be conducted by DOR.

For more information on Schedule C documentation, visit the IRS website. The Schedule C tax form filed for Indiana taxes does not apply.

If customers have any questions regarding Schedule C tax filings, they are encouraged to call DOR's Customer Support at 317-232-2240, Monday through Friday from 8:00 a.m. - 4:30 p.m. EST.

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