I still remember the first time I filed taxes for my business. In addition to having no idea what a write-off really was, I also didn't worry too much about guessing on the numbers. A few government audits later, I discovered what it really meant to do things the right way. Over the years, I have met lots of business owners that weren't too worried about fudging the numbers, and nearly all of them have run into problems. Proper accounting is important, which is why I created this website dedicated to business accounting. I know that if you learn the right way to do things and focus on integrity, your business can avoid a world of problems.
Are you worried about the possibility of being audited? Many people are; the process of auditing can feel very invasive and take a long time, not to mention the additional cost that it often involves. Though the process by which an IRS triggers an audit can be somewhat mysterious, there are ways that you can reduce your chances of being audited.
1. Always Hire a Professional Accountant
More and more people today are trying to do their own taxes. Unfortunately this can lead to errors. Something as simple as a transposition error (typing '28' rather than '82') could be significant enough to red flag your account. Accountants are very skilled in discovering these errors and know where these errors often lie. Many of them also have software systems that can catch mistakes automatically.
2. Use Standard Deductions Where Applicable
In general, using a standard deduction will reduce the overall complexity of your return. This reduces the chances for error and also makes it less likely that your return will trigger an audit. If you are an ordinary individual, it's very unlikely that you will need to itemize your return; in fact, itemizing your return could even cost you more money than using a standard deduction.
3. Never Guess Regarding Your Numbers
When you're trying to figure out something as nebulous as office or educational expenses, you might be tempted to simply guess. You might think that you spent about a thousand dollars on office supplies -- but it's never a good idea to estimate. It's better to go back to your bank statements and credit card statements to find the true number. This number might actually be higher than what you think. If you get audited and can't back up your figures, you'll end up paying for it.
4. Watch Your Charitable Donations
One of the major areas that people try to fudge their individual tax returns is by overstating the amount of money they donated to charity. Consequently, unusually high amounts of charitable donations can trigger an audit. Make sure that you get receipts for all of your charitable donations and avoid the temptation to overestimate the value of physical donations, such as furniture or old vehicles.
Many accounting services (such as The Callen Accounting Group, PLLC) offer audit protection. This does not mean that they can stop you from being audited but it does mean that they will help you throughout the process. Don't worry too much if you do get audited; the goals of the Internal Revenue Service are to find the truth, not punish you. If you have been honest to the best of your abilities on your tax return, you shouldn't face significant punitive issues -- you will just need to pay the difference.Share
11 March 2015