Small business audits are one—if not the—biggest fear of small business owners everywhere. If you’re a small business owner in the El Paso area and you require assistance, Clifford, Ross Raudenbush and Cooper can help. Here are some tips that can help small business owners avoid audits in the near future.
Important Tips to Keep in Mind Regarding Small Business Audits
It is possible to avoid small business audits. In order to avoid audits, small business owners must know what an audit is. When red flags crop up in regard to a company’s financial reports, an official inspection of the company’s accounts will take place. This inspection is usually done by an independent body, much like CRRC, LLC. These audits are meant to establish whether or not the profits and losses of a company were properly assessed. Of course, sometimes companies may make mistakes on their taxes because they’re not specifically adept at tax law. This is where issues crop up. So, now that there’s an understanding of what audits are, how can they be avoided?
What Small Business Owners Should Avoid
In order to avoid small business audits, you need to start off by avoiding some issues and instances that can be seen as warning signs. One of the most common warning signs is the reporting of net loss in more than two years out of five. Not being able to achieve three years of profits within a five-year time span will raise red flags for the IRS, thus leading to an audit.
Another common issue is consistently late tax return filing and tax payments. If a small business fails to proceed accordingly with tax filing and deadlines are missed, penalties will be implemented. If you are unable to meet a specific deadline, you may be able to ask for an extension.
One of the most common issues that raise red flags can be categorized in deductions. Unreasonably high deductions for business-related meals, travel or entertainment, for example, will bring your small business to the attention of the IRS. These expenses can be tax deductions. Any excess in this category will seem untrustworthy and can lead to an audit. Through the audit, the entity will be able to see whether or not these expenses were in fact truthful. The best way to avoid an issue is to save all receipts for these expenses as well as a detailed account of the records themselves.
Get Help with Your Small Business Taxes
If you’re unsure about your business’s future monetary standing, you should contact Clifford, Ross, Raudenbush & Cooper, LLC today. With our assistance, you’ll be able to make sure your small business is on the right track.