Nobody wants to face an audit. No matter how proper your record-keeping is, breaking out the books and opening them up for review is a process every small and mid-sized business owner wants to avoid. While there’s no guarantee to avoid an audit altogether, there are ways to minimize the outcome. Orange County CPA Firm Hall and Company has five ways to help stay audit-free in 2018.
Avoid a lengthy losing streak
It’s understandable that some businesses fail to turn a profit, but writing off multiple years in a row in the red may alert the IRS that you might be trying to game the system. In the event of an audit, the IRS will require you to show the documentation that what you are doing can succeed and that this is a legitimate attempt at business.
Mind your Ps and Qs on your Schedule C
If you’re self-employed and thinking about taking some liberties with your tax deductions, you may want to think again. Keep track of your records and report accordingly. If you work in the service industry and you collect tips or exchange cash for your services, keep your financials squeaky clean. The IRS is well aware that people sometimes like to bend the truth in their expenses and deductions. Make sure you can prove your itemized lists are legitimate.
Maintain a Genuine Office Space
Just because you have a laptop, a notepad, and a pen does not entitle you to write off your master bedroom as a professional workspace. If you plan to write off your office, make sure it is just that, a dedicated office. The IRS looks closely into this space, and they will give you additional attention if you have a combination of the above mentioned lengthy run in the red or a less than impressive Schedule C.
This would seem like a no-brainer to anyone, but settling accounts with large sums of cash will always raise the suspicions of the IRS. If the mindful eye of the IRS isn’t enough to nab your activity, your bank or financial institution very well could be watching. Even if a payment is legitimate, ask your clients for a check, ACH payment or credit card payment, so you have a paper trail that it is an honest transaction.
Hire a Respected CPA Firm
If math isn’t your strength, then why are you risking your tax returns on it? There’s nothing the IRS likes to pounce on more than bad math. Trust us; the IRS will make your hardened high school math teacher seem like a friendly face. Hiring a professional team to analyze your financials is the smartest move you can make. Sure, programs exist that allow you to plug and play numbers into forms, but they don’t provide you with the information for you to always properly answer that tax question. The small change you save on software in the short term could cost you big bucks in the long run. If you need accounting help, Hall and Company, an Irvine CPA firm, has a combined 200 years of accounting experience to help you with an individual or business financial solution. If you’d like to learn more, click HERE.