| Introduction | | | | important than ever to know what triggers an audit, |
| A tax audit is defined as an examination by the Internal | | | | how to avoid being audited and what to do if the IRS |
| Revenue Service (IRS) of an individual or a | | | | is after you. And then if you're audited, you're going to |
| corporation's tax return to verify that the return is | | | | have to prove those numbers. |
| accurate and complete. A tax audit is not pleasant, | | | | Conclusion |
| especially considering that ninety percent of audits | | | | A tax audit is nothing more than the IRS requesting |
| result in the taxpayer owing money. It is an experience | | | | substantiation for the numbers on your return. And one |
| every sane businessperson strives to avoid. CPAs | | | | of the best ways to prepare for a tax audit is to have |
| say the best way to avoid a tax audit is to file a | | | | your tax returns prepared by an outstanding tax |
| complete and accurate tax return. No question about it, | | | | practitioner. The number ONE red flag in triggering a |
| the prospect of a tax audit is scary, and the key to | | | | tax audit is claiming false business expenses. The |
| surviving it is to keep good records. | | | | other red flag is mixing your personal expenses with |
| Business | | | | your business expenses. You can avoid this flag if you |
| An audit can be one of the most feared events of a | | | | set up your business entity correctly using a simple |
| business' or individual's life. One of the biggest and | | | | structure such as an LLC, partnership, or |
| most commonly audited items by the IRS for individuals | | | | S-Corporation. If you start you business out on the right |
| in their own business, and employees of companies | | | | path from the beginning, you will greatly reduce your |
| who use their own car in business, is the tax deduction | | | | chances of an audit. |
| for business transportation. A very common reason | | | | The other advantage of setting up your business |
| people get audited is when they try to take deductions | | | | structure correctly, besides avoiding an IRS audit, is |
| for exceptionally large expenses, or expenses that | | | | that you can start building your business credit profile. |
| they cannot provide receipts for, such as the use of a | | | | When you get your business "creditworthy" then you |
| personal car for business purposes. | | | | won't need to use your personal paycheck to fund |
| For starters, as a small business owner, you're four | | | | your daily business expenses. Thus you can keep the |
| times more likely to be audited than the average | | | | separation between the business and personal - which |
| person. With small business audits on the rise, it is more | | | | is a major key to avoiding a tax audit. |