Nobody wants to be audited. Thankfully there are ways to avoid a tax audit. Read on for ways to keep your business in the good books with the IRS.
Avoid Accounting Errors
A simple accounting error can turn into an audit if you aren’t careful. Make sure your calculations are correct. Avoid mathematical errors by hiring a professional accountant to help you out and double-check your numbers.
Always Sign your Tax Returns
A lot of people surprisingly forget to sign their tax returns. A failure to sign your returns will raise flags for the IRS. They might wonder why you did not sign and what you are hiding from them.
Don’t Underreport your Income
Leaving out a sale from an asset or side income might be tempting but it can get you in trouble. If you get caught not reporting income, you can be forced to pay back taxes for it, which includes interest on your income tax. You can’t just get caught through your audit but you risk getting caught if someone who paid you for a product or service is audited and they link the cash back to you.
Don’t Underestimate your Deductions
Another temptation would be to deduct tax from a home office. Although some items are reasonable, don’t overestimate your expenses. Deducting a high amount for your rent for example should signal a red flag. Only deduct what you use for your business.
Don’t Fail to Hire a Professional
It is best to hire a professional to assist you with your financial statements and audits to ensure that you are calculating your tax correctly.