4 Ways To Avoid a Tax Audit
As a small business owner, one of the scariest words you can hear is “audit”. First, there is the initial stress of potential penalties and fees to contend with, but the idea of having to go back through all of your finances from the past year is the real nightmare. In general, the less you have to deal with the IRS, the better. So how can you avoid being audited? Read on for our top 4 tips that you can use to avoid a tax audit for 2018.
1. Be transparent
It’s a no brainer, but if you don’t want to be audited, be sure you are being honest declaring all of your income. Penalties for not declaring income can be steep, and you don’t want to find yourself on the bad side of the IRS for not accurately reporting income. Be sure to report all income reported on Forms 1099. If you do not, there will be a discrepancy and you will receive a letter requesting additional information at a minimum.
2. Keep good records
Being organized throughout the year when it comes to your financials is essential. It is highly recommended you use some form of accounting software to keep accurate accounting of all income, payments and expenses. Having all of this information organized and readily available when it comes time to file will be a major asset, it will also be incredibly helpful in case you do face an audit later on.
3. Check and re-check your filing…and then check it again
One of the most common errors made in tax reporting is miscalculations. Be overly diligent in checking your work before turning in your filing. Tax software can be a big help, as it often computes data automatically, but it only works if the data you enter is correct. Be extra careful that everything is spelled correctly, all numbers are correct, and that your EIN and SSN numbers are right. Little mistakes like this can often cause an audit to occur.
4. Hire an accountant
Filing your taxes is easier than ever with the advent or programs like TurboTax, but filing them wrong can cost you time and money. The best way to avoid an audit is to entrust a Certified Public Accountant to file your taxes for you. Ask about their fees, but also understand that a good accountant can save you lots of time and money in the process.
Looking for more information on your taxes? Contact us today for a free 30-minute consultation, at 215-277-1191.