Red Flags That May Trigger an IRS Audit

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Red Flags That May Trigger an IRS Audit
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• Some things in life are simply unavoidable, but
  tax audits need not be one of them. Below are 5
  ways to avoid those red flags which may cause
  the IRS to dig a little deeper into your business
  affairs

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• 1. Businesses at a loss If the IRS spot business
  ventures with single proprietors recording
  losses, their chance of attracting an audit are
  high. The IRS may suspect that personal and
  business expenses have been combined, and that
  the proprietor may have made deductions to which
  they are not entitled. If you are the sole
  proprietor of a business in the red, you may want
  to examine your deductions and check that theyre
  valid under the tax code were those business
  drinks or that working lunch really a business
  expense? A new business venture that has made a
  loss in its first year wont be so likely to be
  audited, but it would be wise to try and spread
  the initial set up costs over several years to
  avoid raising any red flags.

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• 2. Reporting Your Entire Income The IRS sends
  business owners W-2 and 1099 forms for them to
  report wages, interest, dividends and capital
  gains, and you must ensure that you include all
  of the information recorded on them, on your
  federal tax return. Any discrepancies between
  what business owners report and what the IRS have
  on file, will be flagged up and will trigger a
  correspondence audit, wherein the IRS will write
  and tell you how much money you owe based on any
  income that they deem you have failed to report.

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• 3. Mathematical Errors If your receipts dont
  match up to the 1099-K, then you might be flagged
  for an audit the IRS will check your returns to
  see if the numbers add up, so be extra vigilant
  with your numbers. As the majority of tax returns
  are done electronically, the tax software will
  help ensure that the mathematics is correct, but
  that doesnt mean that you shouldnt still check
  your numbers for submitting your returns.

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• 4. Credit Card and Cash Transactions The total
  yearly credit card transactions for businesses
  are submitted in a 1099-K form to the IRS, via
  credit card processors. Based on a businesss
  total credit card transactions for the year, the
  IRS can determine how much they should also have
  in cash sales. You may not have been targeted for
  an audit, but beware that the IRS will be
  constantly checking behind the scenes and will
  pick up on any errors that you might have made.

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• 5. Hire an Accountant Instead of spending
  valuable time worrying about IRS audits and how
  to avoid them, why not hire an accountant and
  take the hard work out of your tax returns? If
  you do, then the chances are that youll sail
  through each financial year, safe in the
  knowledge that your calculations are correct and
  the IRS have no reason to investigate your
  business earnings further.

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• At Heyer Associates, we proactively assist our
  individual and small business clients in meeting
  their goals. Our key area of focus is ensuring
  that our clients remain compliant with federal
  and state tax laws by providing them with high
  quality accounting and tax preparation service in
  Miami. If you are looking for an accountant in
  Miami, Heyer Associates would be a right option.