How Your Business Can Survive a Tax Audit?
Tax Audit
The Internal Revenue Service (IRS) conducts tax audits on businesses and individuals each and every year to ensure that all (taxable) income is reported. A tax audit can be a frightening process, but it can be easier to navigate if you have the information you need in order to navigate through the audit successfully.
Here are a few tips to help your business survive a tax audit:
Hire a CPA
One of the easiest ways your business can survive a tax audit is to simply hire a CPA. Hiring a CPA can help you navigate through an audit in the easiest way possible by offering advice on how to properly deal with the IRS.
Don’t Delay the Audit
One of the worst things you can do when being faced with a tax audit is delay the audit. Attempting to delay the audit will throw red flags up to the IRS that you are attempting to cover up something in your taxes.
Have Realistic Expectations
This is not going to be an easy process, but you must have realistic expectations. Realistic expectations means you must come in with all your documentation and also all your paperwork in order to avoid red flags that may make it appear you are attempting to hide something.
Stay Calm
I know this may be hard to do but the best thing you can do is to stay calm. Don’t overreact and just comply with the IRS in every way you can. It’ll be worth it in the end.
How have you survived your latest tax audit? Leave your comments below.
Image credit: GotCredit
Two Ways to Reduce Your Likelihood of Being Audited
Avoiding an IRS Audit
The odds of being audited by the IRS are not too dissimilar from the odds of hitting the lottery; in other words, the probability is quite low. But though this is the case, the possibility of being audited by the IRS is something that always exists. If you find yourself being one of the chosen ones in the IRS lottery drawing, you’ll want to make sure you have all your ducks in a row.
If you have yet to be audited by the IRS, there is still hope; here are just a few ways you can minimize your chances of being picked for an audit:
Audit Yourself
One of the easiest ways to ensure that you won’t be audited by the IRS is to audit yourself. Auditing yourself means keeping an accurate record of all of your expenses, payments, invoices, receipts etc. Keeping track of these things is what will help you make sure you’re not filing your taxes with incorrect financial information. One of the most common red flags for taxes is incorrect information. If you can avoid putting down incorrect information you can substantially reduce the likelihood of receiving an audit.
Ask For Help
Don’t feel like you have to face the potential audit of the IRS on your own. In fact, there are lots of accountants available who can help you as you navigate through your tax filings. Asking for help could save you thousands of dollars in IRS debt.
What other ways have you found to be beneficial to you in avoiding the IRS? Make sure you leave your comments below.
Image credit: dzhingarov
Three Red Flags Your CPA Can Identify to Avoid IRS Audit
Red Flags
Each tax season, only a very small percentage of Americans will be pulled into a tax audit by the IRS. However, though this is the case, the possibility of an audit is always something which hangs in the background when you prepare your return. Competent CPAs can help you avoid audits by identifying certain errors which, if left uncorrected, are likely to draw the attention of the IRS. Here are three red flags which your CPA can help you identify:
Preparer Mistakes
If your CPA isn’t the one who filed your taxes, be sure to check your tax forms to guarantee your forms are error free. It doesn’t matter who made the mistakes, it is ultimately your responsibility to make sure information on your tax forms is accurate.
Charitable Donations
If you have given to several charities, make sure that the donator documentation matches whatever number you put on your tax form. Lying to say you gave more than you actually gave is a federal crime that could cost you thousands or even potentially lead to jail time.
Dependents
One hundred percent of the things you put on your tax form can be fact checked, and many people are often guilty of claiming dependents which they really can’t claim. Make sure you’re not making any claims on your tax forms that you know are invalid.
While tax season can be very stressful, it is always better to be safe than sorry. If you’re not sure about something you put on your tax forms, either ask or make sure you have valid documentation to back up whatever you put down. Though very few individuals will be audited by the IRS, you want to be certain you keep all of your tracks covered just in case you do face an audit.
Do you have other tips that can help you avoid IRS audit? Leave your comments below.
Image credit: blondinrikard
These 5 Tax Moves Could Get You Audited in 2016
The IRS performs audits when a tax return seems inflated or its numbers seem off. In most cases, it is a simple mistake on the preparer’s part and is quickly remedied. To avoid being audited, try not to make these five mistakes.
Big Charitable Donations
When making large charitable donations, make sure that you are donating to a 501(c)(3) organization. Only donations made to these organizations are tax deductible. Larger donations used for tax deduction purposes are scrutinized a bit more than smaller donations.
Being Rich
Being wealthy alone is reason for audit. The IRS is going to make sure that all of your earnings are reported and that major reported expenses are justified. Of course it’s not a bad aim to acquire wealth, however if you do become rich you should be aware that you are more likely to face an audit.
Sold Investments
When you sell an investment, your broker is now required to report the cost basis directly to the IRS. You must report the exact same numbers that your broker submits to the IRS. If the numbers do not match exactly there is a high probability of facing an audit.
Withdrawing from Retirement Funds Early
When you withdraw from a retirement fund early – i.e. before age 59 and a half – you must pay an additional 10-percent tax. Moreover, withdrawing early can also trigger an audit in certain cases.
Auto Mileage Usage Reports
Improper reporting of mileage when using your own vehicle for work purposes can trigger an audit. You are permitted to deduct $0.575 per mile for work travel. The vehicle must be used solely for work purposes to qualify.
The best advice is to make sure your figures are correct and that you report absolutely everything. Leaving out the most miniscule detail can trigger an audit. Keeping immaculate records throughout the year helps prevent these mistakes.
Image credit: Tax Attorney
