Free Search Tool for IRS Business Activity Codes May Lower IRS Audit Risk for a Small Business

Business Wire, Jan 30, 2002

Business/Technology Editors

LOWELL, Mass.--(BUSINESS WIRE)--Jan. 30, 2002

With the March 15 IRS deadline for business tax filings approaching, accountants and business owners can access a free search tool at www.bizownerHQ.com to help determine the right IRS activity code for a business. A business tax return cannot be filed without an IRS business activity code. The IRS switched to a new industry classification system for these codes in 1998. Subsequently, many accountants complain they are often uncertain of which code to assign. bizownerHQ has frequently found activity code errors in reviewing tax returns for valuations.

Business activity codes are a key indicator for determining the comparison group in IRS audit screening programs. These compare a company's financial ratios with aggregate ratios for businesses with the same activity code and of similar size. Companies with substantially different ratios from their comparison group are more likely to be flagged for further scrutiny. Having the right activity code and hence the right comparison group should make an IRS review less likely.

While there are 400 business activity codes listed in tax return instructions, these do not include enough detail to determine the right activity code for most small businesses. Example: There is no IRS business activity code for Internet Service Providers. Possible answers include: 514100 - Information Services, 514210 - Data Processing Services, and 541519 - Other Computer Related Services.

Since IRS codes are based on the North American Industry Classification System (NAICS), bizownerHQ has constructed a searchable index of detailed NAICS codes (980 ) and 18,000 alternative industry descriptive terms. This detail makes finding the right activity code for almost any business possible.

Example: Searching this index for keyword "Internet" finds "Internet Service Providers" and "Internet Access Providers" as other terms for NAICS code 514191 - On-line Information Services. Hence, the right business activity code for Internet Service Providers is 514100, the higher-level code for 514191.

About bizownerHQ

bizownerHQ is the Internet HeadQuarters for fast, reliable, and very cost-effective business valuation services using its expert system, the Valuation GURU(TM). The company (Lowell, MA) provides services to business owners, CPAs, lawyers, and financial services firms. Accountants can use the Valuation GURU(TM) platform to perform valuations themselves, or hire bizownerHQ to perform an arms-length valuation for their clients. For more information, visit www.bizownerHQ.com.