There’s nothing business owners dread more than an IRS tax audit of their company. Having agents comb through books and receipts looking for discrepancies with the possibility of paying hefty fines is incredibly stressful and can disrupt your business. Avoiding an IRS tax audit of your business is easier than you think. So when you’re filing your company’s tax returns this year, remember these helpful tips to avoid an audit and enjoy peace of mind this tax season.
Double Check Your Numbers
Many small business owners do their own books or ask a relative to help. One of the most common reasons companies get audited is also one of the most preventable. Even a simple mistake can cost you and if your numbers don’t add up, you may find yourself getting audited. If you’re not already using an accountant or professional bookkeeper, consider hiring one to help you get ready for tax time.
Be Careful Which Tax Breaks You Claim
Claiming tax deductions and credits is a great way to reduce your taxable income and your tax bill, but it’s important to make sure that you’re choosing the right deductions and credits. Unusual deductions are a red flag for auditors, so before you start itemizing your deductions make sure to do your research so you know which tax breaks you’re actually eligible for. If you’re not sure, the IRS has plenty of online resources to help you get started.
Avoid Hiring Too Many Independent Contractors
Because some companies try to avoid paying payroll taxes by hiring a large number of independent contractors, the IRS has clearly established rules and definitions in place for who can be considered an independent contractor and who is an employee. Companies with a higher ratio of contractors to employees are more likely to get audited, and minimizing the number of contractors you use is an easy way to avoid an audit. If your business depends on hiring independent contractors, you can determine whether or not they’re classified as employees by filing a Determination of Worker Status form with the IRS.
Hire a Professional Accountant or Bookkeeper
The best way to avoid an audit is by filing your taxes with a certified public accountant or professional bookkeeper. If you’re not ready to hire a full-time, in-house professional, consider outsourcing your company’s accounting. Having your business finances reviewed by a professional helps your company avoid mistakes that may lead to an audit while helping you save money throughout the year.
If you’re looking for experienced professional accountants with reasonable rates, TP4 Advisors helps companies of all sizes. Serving a wide range of industries, our staff is ready to help you get your books and finances in order so you have everything you need to file this tax season. We also provide accurate and timely reports year-round so you can sail into next year’s tax time without the hassle. Call us today at 513-489-4874, or contact us via our website to schedule a free strategic session. And don’t forget to check us out on Facebook, Twitter or LinkedIn for our latest tips and updates!