As federal and state budget deficits balloon out of control, the IRS and other taxing authorities are working harder to chase every tax dollar. Your odds of getting audited or receiving other unwelcome correspondence are climbing every year!
Responding to simple written notices can be expensive and time‐consuming, and responding to an actual audit can be even more of a financial burden, potentially resulting in hefty penalties. Even if no penalty is imposed, audits are stressful and can take several years to resolve.
Read and apply the steps below to avoid an IRS audit nightmare:
- Allocate income and expenses wisely. Although audits are usually chosen at random, business owners have a higher risk of being audited. So don’t understate income or overstate deductions, but be reasonable with what you allocate to these categories. If the math doesn’t add up to you, then it definitely won’t add up to the IRS.
- Double-check all IRS documents. When you receive any IRS documents, like 1099’s or W2’s, make sure that they are accurately and appropriately included in your tax return. You may also be required to complete additional forms (i.e. Schedule C for sole proprietorships, Form 1065 for partnerships, Form 1120-S for S corporations or Form 1120 for C corporations). Don’t forget to include these to report your business income and expenses.
- Let Alfano & Company advise you year-round, not just during tax time. By regularly assisting you with your financials, we can prevent any behavior that could increase the probability of being audited. In case you do get audited, though, opt in for our Audit Correspondence Plan, which can be likened to annual audit insurance. For an additional fee, we will respond to written notices from federal or state taxing authorities related to this year’s tax return.