As a new business owner, you’ll probably agree that there was a lot that you had to learn especially as your business begins to expand, and filing taxes for your business is one of them. Many small businesses face many challenges, including the risk of an IRS audit. Audits can be costly and time-consuming, and they can also be stressful for business owners. However, there are several steps that small businesses can take to reduce their chances of being audited. Here are six things that can help small businesses avoid an IRS audit:
Keep Accurate Records
One of the most important things a small business can do to avoid an IRS audit is to keep accurate records. Keeping detailed and organized records of all business transactions, including income and expenses, will help ensure that the business is in compliance with tax laws. The IRS may choose to audit a business if it appears that there are discrepancies or errors in their records, so keeping accurate records is crucial. This is why a bookkeeper is essential. Having a certified professional as your bookkeeper will make a big difference. As your professional bookkeeper, Bookkeeping Confidential will not just ensure that your records are accurate and up to date, but also that you’re 100% compliant with state and federal laws. Get in touch.
Use a Professional Accountant
Small businesses can benefit from the services of a professional accountant. An accountant can provide advice on tax laws and regulations, help with record-keeping, and prepare tax returns. Having an experienced accountant on hand can help ensure that the business is in compliance with tax laws and regulations, reducing the risk of an IRS audit.
File Taxes on Time
Filing tax returns on time is essential for small businesses. Late filings can result in penalties and interest charges, which can attract the attention of the IRS. Filing taxes on time shows that the business is organized and responsible, and it can help avoid the possibility of being audited by the IRS.
Be Conservative with Deductions
Small businesses should be conservative when taking deductions on their tax returns. Deductions that are too large or seem unreasonable can attract the attention of the IRS. It is important to document all deductions and ensure that they are legitimate business expenses. This can help avoid an audit by showing that the business is operating in good faith and in compliance with tax laws.
Avoid Cash Transactions
Cash transactions can be difficult to track and can attract the attention of the IRS. Small businesses should avoid cash transactions as much as possible and instead use checks, credit cards, or electronic payments. This can help ensure that all transactions are recorded and that the business is in compliance with tax laws.
Can’t Avoid Being Audited By The IRS? Seek Professional Help
Despite taking all necessary precautions, small businesses may still end up being audited by the IRS. In such cases, it is important to seek professional help. A tax attorney or accountant can help represent the business during an audit and ensure that it is conducted fairly and in compliance with the law. Seeking professional help can also help ensure that the business is able to defend itself against any charges or penalties that may arise during the audit.
There are several steps you can take as a small business owner to avoid being audited by the IRS. Keeping accurate records, using a professional accountant, filing taxes on time, being conservative with deductions, avoiding cash transactions, and seeking professional help in case of audits can all help reduce the risk of an IRS audit. By taking these steps, you can focus on growing and thriving without the stress and expense of an IRS audit.
At Bookkeeping Confidential, our focus is on your business growth. We work on your numbers and provide you with detailed reports and resources to help you make informed decisions for your business. Schedule your FREE non-obligatory consultation, today!