Is the IRS auditing your Richmond business or asking about its payroll? Then you need to know what the examiner is testing, and what could come next. A business tax attorney at Whiteford Tax Defense can explain both and represent you before the IRS.
Every business must file accurate income tax returns on time. Mistakes and delays can be costly, so we work to resolve a problem before it grows. While the IRS takes a close look, we protect the company. We also guide deals that carry real tax risk. Businesses of all sizes have hired us, from one-owner firms to large companies with complex tax positions. For payroll, filing and audit issues that any business can face, see our page on tax help for businesses.
IRS questions for Richmond restaurants, contractors and employers
A Richmond restaurant that takes in a lot of cash may face an IRS audit of its reported sales. The examiner checks the books against the business itself, from the register tapes to the bank deposits.
Contractors face a different question. If a renovation business pays its crews as independent contractors, the IRS may open an employment tax audit to decide whether they were employees. If they were, the company can owe employment taxes it never withheld or paid. That dispute can go to the U.S. Tax Court, which holds trial sessions in Richmond.
For any employer, missed payroll tax deposits put the people who run the business at personal risk. The IRS can seek the trust fund recovery penalty from owners, officers or staff who controlled which bills got paid. If the IRS asks to interview you about the deposits, talk to a lawyer first. The questions below explain what the IRS looks for in each case.
1031 like-kind exchanges for Richmond property owners
A 1031 exchange lets you sell Richmond investment or commercial property and put the proceeds into a similar property. You defer the capital gains tax until you sell the replacement.
The two properties must be of the same general kind. That test is broad: developed real estate can be like-kind to vacant land. But property in the United States is not like-kind to property abroad.
The sale proceeds must also go through a qualified intermediary, who holds them until the replacement purchase closes. Any profit you take out along the way is taxable in the year you receive it.
On top of that, two deadlines control the exchange, and both start on the day of the sale. By day 45, you must identify possible replacement properties in writing to the intermediary. By day 180, you must close on one of them.
Missing either deadline can make the whole gain taxable. So our Richmond office goes over the timeline with investors before a sale closes. We also help structure the deal to hold up under IRS review.
Attorney-client privilege for business owners
Once Whiteford represents you, your calls, emails, meetings and letters with your attorney are generally covered by attorney-client privilege. Virginia's Rules of Professional Conduct reinforce that protection. The exceptions are narrow: when a client waives the privilege, or seeks a lawyer's help to commit fraud.
Most businesses that hire a lawyer for a tax problem have not committed fraud on purpose. More often, a routine return has led to an IRS audit. The owner is not sure what comes next, or how to get ready.
Common matters we handle
- Preparing for and responding to IRS audits of Richmond businesses, including restaurants, over one or more tax years
- Employment tax audits of Richmond employers, including worker classification and proposed trust fund recovery penalties
- 1031 like-kind exchanges of Virginia investment and commercial property
- Complex federal filings for offshore funds and cryptocurrency reporting
- International tax questions for companies that do business abroad
- Ongoing filing and compliance help for closely held and growing companies
- Local, state, and federal tax disputes for Virginia businesses
A note on admissions Federal tax matters are handled nationwide, including IRS examinations, appeals, collection, and Tax Court litigation. Virginia state and local tax matters are handled together with Whiteford attorneys admitted in Virginia, or with co-counsel where a matter requires it.
Why taxpayers choose Whiteford
- Local to Richmond and experienced in both federal and Virginia tax matters
- Represents businesses of every size, from sole proprietorships to corporations with complex tax positions
- Handles both defensive work, such as audits and disputes, and planning work, such as 1031 exchanges
Frequently Asked Questions
Our restaurant in the Fan District takes in a lot of cash. How will an IRS examiner test the sales we reported? +
Mostly by checking your books against the restaurant itself. The examiner usually starts by interviewing the owner or the officer who runs it day to day. Next comes a tour of the premises. The IRS traces entries in your books back to register tapes and other sales records. It also reviews your bank deposits for income you did not report. What you say about cash on hand in that first interview is hard to change later, so prepare with care.
What can the IRS do if our restaurant's books do not match its register tapes and deposits? +
It can rebuild your income by indirect methods. Federal law allows those methods only when there is a reasonable indication of unreported income. The IRS's own manual says a markup analysis is effective for restaurants. It starts from your purchase costs and your menu prices.
Our Richmond renovation company pays its crews as independent contractors. Where does that leave us if the IRS says they were employees? +
The company can owe employment taxes it never withheld or paid. To decide whether the crews were employees, the IRS looks at the whole relationship. It asks who controls what the crews do and how. It also asks who supplies tools and pays expenses, and whether there are contracts or benefits. An audit can end in a Notice of Employment Tax Determination. The company then has 90 days to petition the Tax Court, which holds trial sessions in Richmond.
Is there relief for a company that treated its crews as contractors when they should have been employees? +
Sometimes. Section 530 of the Revenue Act of 1978 can protect a business in this position. The business must have had a reasonable basis for treating its workers as contractors. It must also have treated workers in similar positions the same way, and filed the required Forms 1099. A company that is not under an employment tax audit may also qualify for the Voluntary Classification Settlement Program. It then moves the workers onto payroll going forward, with partial relief from federal employment taxes.
The IRS wants to interview the owners of our Richmond company about missed payroll tax deposits. What is it trying to decide? +
Whether any of you should personally owe the trust fund recovery penalty. It covers income tax withheld from employees' pay, plus their share of Social Security and Medicare tax. The interview maps who had the duty and the power to direct those payments. That can include owners, officers and employees who decided which bills to pay. It does not include someone who only paid the bills another person chose. The IRS must also show that the failure to pay was willful.
Does our company have to close before its owners can owe the trust fund recovery penalty? +
No. The penalty can apply while the business is still open. In fact, paying suppliers or other creditors while the deposits went unpaid is treated as a sign of willfulness. Anyone the IRS names gets a letter proposing the penalty, with 60 days to appeal before the IRS assesses it.
We are selling a Richmond commercial property and buying another. What are the 1031 exchange deadlines? +
There are two, and both run from the day of the sale. Within 45 days, you must identify possible replacement properties in writing to the qualified intermediary. Within 180 days, you must close on one of the properties on that list. Missing either deadline can make the whole gain taxable, so plan the timeline before you sell.
When should a Richmond business hire a tax attorney? +
Many businesses first call when the IRS contacts them about a dispute or an audit for one or more tax years. Others bring in a lawyer ahead of time, for complex filings, offshore fund and cryptocurrency reporting, or big property deals. Larger companies often keep a lawyer involved year-round, because mistakes in those filings carry heavy penalties. Calling early usually gives you more options and a stronger position when you negotiate.
Are my conversations with a business tax attorney confidential? +
Yes. Once Whiteford represents you, your calls, emails, meetings and letters with your attorney are generally protected by attorney-client privilege. Virginia's Rules of Professional Conduct reinforce that protection. The exceptions are narrow. A client can waive the privilege, and it does not cover asking a lawyer for help with a fraud. For a typical business owner facing an audit, what they tell their lawyer stays protected.
