Precision Corporate Services

Business Tax Advice

Posted on Monday, August 2nd, 2010 at 3:00 pm.

10 things you can do to prevent IRS Audit, business advice: 

No one wants a visit from the IRS and at Precision Corporate Services we want to help you avoid that so here is a handy list to help. For more business help visit us @ www.precisioncorpsvcs.com. 

1. Avoid Fluctuations In Income 

The IRS has a pretty good idea how much you live on; if they notice a drastic change in your income, they will most likely suspect that something was not reported. They may even assume tax fraud. So, to help prevent or avoid an IRS Audit, avoid fluctuations in income. 

2. Report All Income 

The IRS has access to quite a bit of information; it is probably not the best idea to omit reporting some income. Especially when running your own business. If they discover unreported interest, dividends or miscellaneous income, you may not be heading down the nicest path. Keep in mind that the IRS receives the same 1099s that you are receiving too. So, to help prevent or avoid an IRS Audit, report all income. 

3. Abnormally Low Income 

If your income is substantially lower than other individuals in your profession, the IRS may become suspicious. Always be honest even it might be something your planning on reporting later, do it now and get it over with. So, to help prevent or avoid an IRS Audit, do not report income lower than received. 

4. High Income 

If you have an income over $100,000, you may want to be extra cautious. Track everything. IRS audits are five times more likely to occur if you are in this income bracket. 

5. Don’t Round Numbers 

Good record keeping will draw less attention from the IRS. When numbers are rounded the IRS will suspect that errors could have occurred. For instance, reporting $1,978 dollars on meal expenses rather than $3,000 demonstrates that you are organized and precise. The IRS likes it when it all adds up. So, to help prevent or avoid an IRS Audit, don’t round numbers. 

6. Watch Your Number of Charitable Contributions 

Charity is important, but be aware that a red flag may arise if you have made a lot of contributions. Make sure to hold onto your receipts, particularly, if you are donating five times as much as the average person in your income bracket. So, to prevent or avoid an IRS Audit, watch your number of charitable contributions. 

7. File a Complete and Organized Return 

When the prepared return is sloppy or missing information, the IRS will be more likely to target you. With technology today, returns are checked by a computer, but if a computer can’t read the return, then an IRS agent will have to. This is where filing electronically comes in quite nicely. So, to help prevent or avoid an IRS Audit, file a complete and organized return. 

8. Be Careful with Deductions  

The IRS knows the average percent of deductions for your income bracket. You are entitled to the deductions that you have, but if they are more than the averages, you may draw the attention of the IRS. So, to help prevent or avoid an IRS Audit, be careful with deductions. 

9. Consistent Information on State and Federal Returns 

If you are giving the IRS different information on the returns that you are submitting, they may suspect that you are trying to hide something from them. So, to help prevent or avoid an IRS Audit, report consistent information on State and Federal returns. 

10. Do not Participate in Tax Scams 

You should avoid participating in these transactions as they will only raise more red flags in your direction. So, to help prevent or avoid an IRS Audit, do not participate in tax scams.

Tags: business advice, business audits, precision corporate services, tax help