The IRS is Auditing Less…And Other Financial News for You This Month


Here are three things in the financial world that happened this past month and how they affect might you. Did you catch them?

1. You’re less likely to be audited this year.

Due to budget cuts that have reduced its staff by about a third since 2010, the Internal Revenue Service can’t perform as many audits as it used to. In fact, in 2017, the IRS audited only 1 in about 160 individual tax returns—the lowest number since 2002 and the sixth consecutive year that audits have declined. At its peak 8 years ago, the IRS audited 1 in 90 individual returns. The audit rate last year declined the most for high-income households, although they were still audited at a higher rate than taxpayers with lower incomes. (Source: Wall Street Journal)

Data: Less audit scrutiny (Source: WSJ)

The Takeaway:

Does this mean it’s OK to start cheating on your taxes? Of course not!

For starters, an audit shouldn’t be the reason why you comply with the law. You comply with the law because it’s the law and it’s the right thing to do. If you’re running a reputable business then this shouldn’t even be a consideration. And sure, the chances of your audit have decreased. But in today’s world, it’s very easy for disgruntled former and current employees or even outsiders to act as whistleblowers if they see you doing something wrong. Once you’ve been flagged, you’ve got trouble.

What kind of trouble? Plenty. An audit is a time-consuming and very costly process that, if anything bad comes of it, could not only ruin your reputation in your community but potentially put you out of business. I know many of my clients who bend the tax law and personally I’m not sure how they sleep soundly at night knowing just how precarious their livelihood is if anyone were to find out. The bottom line: don’t worry about the chances of being audited by the IRS. Just obey the law.

2. One small bank is increasing its lending thanks to technology.

Since it competes with several larger regional banks in Ooltewah, Tennessee, Millennium Bank knew it had to find a creative way to attract and retain borrowers. About three years ago, its management team decided that, to do that, it had to speed up loan delivery. Unfortunately, its credit analysis process was highly manual and didn’t accommodate quick turnaround on loans. The solution was to upgrade its technology to improve its ability to analyze loans and speed up decision-making. To accomplish this, the bank brought in new software designed specifically to improve the lending process. Now, it can fund loans within hours or even minutes. (Source: American Banker)

The Takeaway:

Ever paid for something in Europe? Or even lived there for a few months? If you have, then I’m sure you’ll agree that the U.S. banking system is still operating in the dark ages. The fact that many of us still use paper checks boggles the mind of many of our European friends!  There are many reasons why this is the case – the country’s size, the difficulty of change, the complexity of our systems. But customers – particularly millennials in their 20’s and 30’s – don’t want to hear that. They want to hear fast. They want to hear yes. They want to hear now.

Millennium Bank is doing what many smaller banks are doing to compete. They’re investing in technology to enable their customers that significantly reduces manual document entry and turns the loan approval processes into an online and mobile experience that delivers answers – and cash – quickly. It’s not just a customer service issue – it’s an operational one. With the right internal software, errors can be reduced and productivity increased. “We’ve seen our loan growth increase pretty well without adding any headcount,” John Hatfield, credit officer at the $139 million-asset bank, said to American Banker.

I’m not so sure that bank branches will be completely eliminated in the years to come. But there’s no question that today’s customers are demanding many of the services provided by their branch to be delivered faster. If you’re a smaller financial institution this type of investment will be critical to your survival.

3. Amazon wants to get to teenagers before the banks do.

The one age group that’s been a challenge for Amazon’s marketing team is teenagers, also known as ‘Generation Z’, because they don’t have bank accounts or debit/credit cards and prefer shopping at brick-and-mortar stores rather than online. But now Amazon is talking to large banks such as JPMorgan Chase and Capital One Financial Corp. to create a product similar to checking accounts that appeals to young people and others without credit cards. If Amazon can deliver a better banking experience for these digitally savvy youngsters, it could start taking lifelong banking customers away from banks of all sizes. (Source: Bloomberg)

Data: Consumers open to banking with Amazon (via Bloomberg)

The Takeaway:

Don’t be so shocked – retailing is a great place to do your banking and Amazon is only doing what smart companies do: it looks to build a lifelong relationship with its customer so that they keep coming back to the online giant for just about anything needed. This is why the company, according to the Bloomberg article, “offers new parents discounts on diapers and baby food. It gives college students discounted Amazon Prime memberships, providing free shipping and access to streaming video so young adults will already be Amazon shoppers when they start making more of their own spending decisions.”

So what better way to solidify a relationship than to offer banking services? People need credit and credit cards. Loan services. Most of these services can be performed online right now and the demand is almost guaranteed grow as younger generations look for an easier way to manage their money and new types of payments like digital currencies become more mainstream.

By the way – Amazon, isn’t the only retailer trying this. Both Sam’s Club and Walmart offer banking services to their customers and others are testing the waters. They get it: there’s a new generation of customers quickly moving to the fore, and these kids want convenience.

Disclaimer: The information in this blog doesn’t replace the advice of a tax or legal expert. Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. Any opinions, analyses, or recommendations expressed in this article are the author’s alone. If you have any questions about your small business financial situation, talk to a professional.

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