No matter the situation, we know that being contacted by the IRS can be nerve-racking and intimidating. Whether you see the name scroll across the caller ID or just in their letterhead, our hearts tend to beat a little faster.
And rightfully so. For Pete’s sake, it’s the IRS. They’re likely after your money and you fear you may have filed something wrong. And although there’s no cookie-cutter way to prevent them from contacting you, there ARE 4 helpful tips that’ll help you steer clear of their audits.Small Business Owners are More Likely to Be Audited.
Why? Since your returns don’t require you to send in your receipts and other business documents, the IRS has more of a reason to prove that you’ve been truthful in your filing.
Tip #1: File Correctly
Using a software program is a good start, but may not be 100% accurate. If you’re feeling on the fence about your filing, don’t jeopardize it — hire a professional to do it (see Beaton Accounting). Claim the deductions you’re truly entitled to and avoid filing for the ones you’re not.
Tip #2: ALWAYS Double Check
Remember elementary school math class? Most errors done on tax returns are because of mathematical errors and not checking your work. It’s very easy to add a row incorrectly or screw up on percentages. The IRS will have less reason to contact you if all of your numbers are on point.
Tip #3: Have Your Original Documents on Hand
The rule of thumb is to keep all your tax filing documents for seven years. As most audits are done for the previous year’s return, auditors can go back as far as they’d like if they feel you are trying to trick the IRS. When you hold onto your documents, you’ll be able to back up any claims of fraud. The penalties for wrong tax filings can be steep, so holding onto your paperwork can save you THOUSANDS.
Tip #4: Notice Past Errors? File an Amended Return Before it’s Too Late!
Don’t wait to be contacted by the feds. If you see a mistake on your return, file a 1040X return to correct the original. You may pay extra taxes, but the IRS is lenient when it comes to genuine, innocent mistakes. If you notice an error, but refuse to file, you’re just adding unnecessary stress to your already-full plate of small business owner stress.
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