The Internal Revenue Service (IRS) openly admits that it is more likely to target small businesses, especially “if your business runs mostly on cash or cash incentives,” USA Today reports. Don’t risk an audit this tax season. A few small business accounting tips can save you a lot of trouble with the IRS.
- Avoid Audit Red Flags
- Explain Any Outrageous Claims
Good accountants will tell you that the IRS is, first and foremost, looking for any deviations from the norm. It’s that simple. “Having higher-than-average expenses or unusually low income, or even a loss, is a common audit red flag,” CNBC reveals. Avoid an audit by carefully substantiating any unusual or extenuating circumstances.
- Don’t Go It Alone
Finding an accountant for small businesses can spare you a lot of time, money, and headaches. Filing a tax return for a small business can easily get complicated. If you are uncertain how to file particular expenses — or if you are already hearing back from the IRS — it is best to get help from the experts. Small accounting firms can guide you through the process step by step.
Managing a small business does not necessarily guarantee a closer look at your tax returns. Certain deductions and relationships will, however. The IRS is going to take notice, for example, if you’re “very charitable,” CNN warns. “You’re required to keep receipts for any donations exceeding $250, and to fill out Form 8283 for any non-cash donations exceeding $500,” CNN explains. “Non-cash donations are where a lot of people often exaggerate, so remember that the items you’re giving to Goodwill should be valued at the price someone would actually pay for it — not the amount you bought it for years ago.” In other words, it is always safer to underestimate the value of donated items than to exaggerate.
What is another surprising red flag? Keep in mind that you are much more likely to be audited if you work with “business partners or investors whose returns were selected for audit,” according to USA Today. Carefully select investors — and work closely with trusted small accounting firms — to avoid trouble during tax season.
Getting audited can threaten the future of your small business. Avoid monetary backlash by carefully filing tax returns, avoiding audit red flags, explaining any unusual circumstances, and enlisting the help of small accounting firms. Links like this: www.sp-pc.ca