Many people fail to consider the fact that the IRS and its agents have become particularly adept at searching the Internet for information. Thus, some online business owners are all too willing to deny that they have an e-business or that their traditional brick and mortar company also has an online component. Unfortunately, these individuals often find themselves in difficult, delicate situations as IRS auditors can and do use the Internet and other resources to disprove claims and statements made by taxpayers. If you are caught making an inconsistent statement or lying to the IRS, the odds of facing criminal tax prosecution or a full-scale audit increase significantly.
Whether you are running a traditional or an online business, you need to attract customers and clients to keep your lights on. The IRS realizes this fact. Thus, what started out as agents checking the Yellow Pages for businesses and advertisements has now evolved into Google and other searches for businesses. Agents may even search through sites where freelancers and independent contractors can post that their are available for work. Essentially, the IRS will delve into the normal methods by which a customer would locate your business. Furthermore, they may even contact third-parties, like clients and vendors, for information regarding your commercial activities. If you have advertising contracts, referral agreements, or ship goods the IRS could use these real-world and online factors to catch you in a tax lie.
The IRS will also analyze the claims you make regarding business expenses and business income. If you make certain large claims for business deductions or tax credits, it may raise the suspicion that an e-business exists. Furthermore, IRS agents are likely to trace credit card transactions to ensure that multiple conduits are not being used to conceal receipts and income. Essentially, IRS agents will use all available sources of information to catch taxpayers in a tax lie. If you are caught lying or making inconsistent statements, there is a real likelihood that you could face criminal tax charges.