David, Brody & Dondershine, LLP Experienced General Business Law Attorneys
2100 Reston Parkway, Suite 370
Reston, VA 20191

Sole proprietors and tax obligations: work with experienced attorney

For small business owners, dealing with taxes can be a confusing and stressful job. It is a necessary one, though, and failure to careful handle tax obligations can have bad consequences for a business.

Individual business income is, according to the IRS, the largest sources of unreported taxes, and accounts for around $125 billion in unreported taxes every year. One of the challenges for the IRS is that most of these taxpayers are sole proprietors whose income it can be difficult to track. 

The agency’s primary way of detecting unreported income is to conduct audits. Much of sole proprietors’ income, about 63 percent, is not recorded on any tax information document or forms, and is considered low visibility. The goal for the IRS is to ensure that taxpayers report their business income accurately.

In determining where to focus its efforts, the IRS uses a proprietary algorithm to identify those at high risk of tax noncompliance. An IRS audit can be stressful for a sole proprietor, but studies have shown that tax audits do not actually have impressive long-term effects on compliance.

Experts on the issue say, though, that most business owners do not intend to snub the IRS, but simply don’t keep good enough records and don’t have a solid understanding of the requirements of tax law for sole proprietors. Though audits are rare, sole proprietors need to understand their tax obligations to ensure they remain in compliance with the law and that they are prepare to face scrutiny when an audit is undertaken.

In a future post, we’ll take a look at some of the tax issues sole proprietors need to be aware of and how an experienced business law attorney can help a sole proprietor handle tax matters. 

No Comments

Leave a comment
Comment Information

Contact Us For More Information

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy


Office Location

2100 Reston Parkway
Suite 370
Reston, VA 20191

Phone: 703-264-2220
Fax: 703-264-2226
Map & Directions