The idea of a tax audit, having a tax professional go over every last detail of your finances with a fine toothed comb, is frightening for anyone. It's especially frightening for business owners. After all, no matter how diligent we try to be, taxes are complicated things, and we're bound to make a few mistakes or miscalculations along the way. Fortunately, there are ways that you can reduce the risk of having your business audited in the first place. None of these methods are fool proof, of course, since audits can happen at any time and to anyone- that's why you should always have a good tax attorney's number on speed dial. However, you should definitely do anything you can to keep auditors at bay, and luckily, there's a lot you can do:
Be Diligent in Your Record Keeping
To begin with, you should always keep the most careful and detailed financial records possible. You should be able to glance at your records and know immediately and exactly what your income was for the tax year, how much you owe in debt, and any deductions you have taken.
The "deductions" part is especially important since many business owners are dishonest or do a little "creative fudging" in this area. You should, of course, be honest in all of your financial matters, but honesty itself is not enough. Make sure you have paper proof of everything money-related, and you should be in the clear when it comes to business auditing. Plus, even if an audit does happen, you'll have everything you need to stay safe.
Avoid Payroll Problems
One of the main reasons that businesses get audited is because of issues with their payrolls. If you owe debt on your payroll, the IRS is going to be interested. And, if it delves further into that interest and thinks it may be able to collect, that's pretty much a recipe for an agonizing audit.
Obviously, as a business owner, you need to do your best to keep all of your records and financial happenings correct and in the clear. However, if you don't pay attention to anything else, pay attention to your payroll. It's the first place the IRS is likely to look for evidence that an audit needs to be performed.
Explain Away Your Worries
Sometimes, perfectly legitimate things can look suspicious on IRS forms. Maybe, for example, you had to meet with clients in a place that seems glamorous, such as Paris. In reality, it may have been that that location was the only convenient one for you. To the IRS, however, it might look like you found a convenient way to write off your latest vacation, which would certainly raise some red flags.
Fortunately, there are opportunities to explain these kinds of circumstances before they even have a chance to raise suspicions. Take advantage of the additional forms and worksheets provided for cases such as this. If you can explain the IRS' worries away, they don't ever have to become your worries too.
As you can see, there are lots of things you can do to reduce your risk of an audit. Do them! And then, on top of that, be honest and have a good attorney. That way, even if you do happen to get audited, you'll be anxiety-free, and, ultimately, in the clear. To learn more, contact a professional like LaSpada, Anthony J. PA with any questions you have.