Tax Audit Guides

Will the IRS Penalize Your Business for Claiming Health Benefits?

As an employer, you may be able to claim a tax credit on various eligible healthcare benefits you offer your workers. However, perhaps you heard that claiming this credit may draw scrutiny from the IRS. Is this true, and how can you avoid an IRS audit?

Here’s the short answer: If you follow IRS guidelines, you don’t need to fear an audit when claiming tax benefits. Consult an IRS tax attorney or another tax law professional if you are unsure whether you qualify for a tax credit. 

Which Employee Health Benefits Are Tax Deductible?

Healthcare is among the costliest employee benefits. However, many employers may claim significant tax credits for this expense. For example, if you employ fewer than 25 full-time employees who earn less than $50,000 per year, you may qualify for the Small Business Health Care Tax Credit. The exact credit depends on your number of employees.

If you can’t afford full-blown employee health benefits, you may participate in a tax-advantaged plan like a Health Reimbursement Arrangement (HRA). An IRS tax relief attorney can help you understand which employee benefits are tax deductible.

Which Benefits Don’t Count as Health/Medical Expenses?

Not all employee wellness perks are eligible for tax deduction purposes. For example, non-medical food, supplements, nutrition plans, and exercise programs typically aren’t reimbursable under employee healthcare plans and flexible spending accounts (FSAs).

The IRS has recently issued a warning to taxpayers about claiming ineligible personal expenses as medical expenses. Unfortunately, some shady companies aggressively promote such unqualifying claims. For example, a service may supply a “medical authorization” stamping dietetic food as a medical expense. Such documents are invalid for tax credits, and anyone who uses them could face an audit. 

Will Claiming Health Benefits Draw Attention From the IRS?

If you claim a tax credit for an eligible health expense, your business shouldn’t run into trouble with the IRS. You definitely shouldn’t forgo claiming tax benefits because you’re concerned about the possibility of an audit.

However, the IRS may decide to audit your business if there’s a discrepancy between some of your tax forms or your deduction amounts are unusually high compared to your income or number of employees. If this happens, a tax litigation lawyer can explain what you should do next.

How Can You Avoid an IRS Audit When Claiming Tax Benefits?

Working with a reputable IRS tax attorney can help you avoid mistakes in your tax documentation and save you a lot of time and trouble. Tax credit rules and calculations can be complicated and may change from year to year, so it’s easy to make errors when filing taxes. 

Keep in mind that anyone can make a mistake and that the IRS could randomly audit your business. If this happens, contact an IRS audit defense attorney and provide any documents the IRS may require. A tax dispute resolution lawyer can help you handle an audit, negotiate with revenue officers, and protect your company’s interests. If you owe back taxes, a tax lawyer can help you work out a reasonable payment plan. 

Simplify Your Taxes With Reliable Counsel by Levy & Associates 

Are you unsure whether your company can claim a tax credit on employee health benefits? Contact us at Levy & Associates. Our knowledgeable staff includes IRS tax attorneys, former revenue officers, CPAs, accountants, and other tax professionals. We can help you understand what credits you’re eligible for and ensure your tax documents comply with IRS requirements. Call 800-TAX-LEVY or contact us online to consult a tax lawyer for IRS matters. 

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.