When you are running your own business, taxes are one of the most important things to stay on top of. No business wants to be audited by the IRS. An audit can be time-consuming, costly, and very stressful for a small business owner. Let’s talk about some expert tips on how to keep your business away from the audit zone.
Keep Everything Organized
Keep accurate, detailed records of your financial transactions. Keep track of the cash as it’s flowing in and out of your business. Every sale, every invoice paid, your payroll, and any expenses you plan to deduct from your taxes must be documented consistently and accurately. Meticulous bookkeeping keeps your business running smoothly and can help avoid audits and scrutiny from the IRS that could hurt your business.
Be Accurate and Professional
The IRS examines tax returns for issues and discrepancies in a business’s reporting. If they decide to audit your business they will want to examine all of your company’s financial information to make sure that you are reporting everything precisely. If your return is messy and has accounting errors, the IRS may question whether your numbers were accurate or not. If you keep good records, you will easily be able to provide proof that your reporting was accurate. Don’t estimate numbers, it could cause major complications down the line.
If you are doing a good job with your bookkeeping, you should have no problem filing your taxes on time. File electronically using business software so you can easily access your return and check for errors. The IRS prefers e-filing so they can quickly and easily access your information. Delaying filing doesn’t change or delay the money you owe. Make your payments on time to avoid red flags that might prompt an IRS auditor to examine your business.
Avoid grey areas and “miscellaneous” deductions as often as possible when reporting your business’s gains and losses. You must be sure that deductions are eligible and explain them as clearly as possible. Mysterious deductions can draw negative attention from auditors. Vague or unusual deductions should be accompanied by detailed explanations or documentation to prove to the IRS where the money went and why it should be eligible for a tax deduction.
Avoid Risky Write-offs
Certain deductions can be difficult to prove. Home offices may be eligible for business tax returns but there are very specific rules. The area or room you choose must be specifically designated for business use, nothing else. Only a portion of meals and travel expenses are tax-deductible so you must be careful with these deductions. You must decide if the benefits of the deductions outweigh the hassle. Have a clear understanding of tax rules and never mix your personal and business expenses.
Hire a Professional
Tax rules are complicated and sometimes difficult to understand. Professional tax advice and preparation can help your business avoid an audit. An accountant can prepare a more professional tax return and make sure that your numbers accurately represent your small business revenues and expenses. Don’t spark the curiosity of the IRS and face an audit, call Venus Michael Account-Ability today and put your tax worries behind you.