How to Avoid an IRS Audit Next Year
Monday, May 21, 2018, 6:00 PM | Leave Comment
As you may know, each year the IRS cracks down a little bit harder on taxpayers and pursue a larger number of audits. This has some small businesses and entrepreneurs on edge.
After all, an audit could potentially ruin a business, and someone just starting out and figuring it out doesn’t have the resources and funds to recover from a period of inactivity or to hire the right people to help in the case of an audit.
Regardless, an audit doesn’t mean your business is doomed either. While you can never 100 percent destroy the chance of an audit, there are ways you can reduce the probability.
Here are some tips on doing that, and some hopefully reassuring advice at the end!
-
Know the Dangers
It would be unwise to do things that we know are on the IRS’s blacklist.
Some things to avoid:
-
Incorrectly reporting any home office deductions.
-
Claiming charitable contributions you didn’t make.
-
Doing incorrect math.
-
Not filing your 1099 form or any additional income.
-
Filing late.
If you had to sum it up, it would just be to make sure that everything is filed on time and reported correctly to the best of your knowledge.
With the IRS cracking down more and more on small companies and looking to taxpayers to fix the deficit, doing anything incorrect could paint a target on your back, especially if you don’t have the resources to survive something — because that may mean you don’t have the resources to defend yourself either.
-
-
Know the Rules
Knowing the ins and outs of tax and deduction law will keep you farther away from audit danger.
For instance, one thing that gets a lot of people in trouble is that they try to write off things they actually can’t write off. For small businesses owners and self-employed workers, there’s often attempts at writing off office equipment — but all equipment must be specific to work use.
For instance, if you use your home computer for work, but also use it for all of your home bills, Amazon orders, or your spouse and family members use it on their own time, then you cannot write the computer off as a work expense.
Additionally, if you have employees, you need to make sure their payroll is recorded and filed correctly. You (and they as well) can get in a lot of trouble if you’re not deducting the right amount of money from their checks to cover their benefits, federal taxes, and the like.
-
Know the Odds
Ultimately, the long and short of it is that you want to take care of yourself. But if you find yourself anxious about being audited, know that people on the records as “maybes” for auditing are selected randomly.
Don’t get complacent, but if it gives you any solace, your chances are still a little slim. However, you do not want to get caught off guard, and for this reason should still be prepared.
What specific preparations do you take to avoid audits? Let us know in the comments below!
Throw us a like at Facebook.com/doable.finance
