Tax Tips
Tips to Avoid a Business Audit
By Charles Lewis Keep your Business separate from your Personal Life. One way to do this is to open a Business Bank account and to obtain a Business Credit Card. This way, you can reduce the possibility of comingling your personal and business expenditures when completing your tax return. Business owners should be careful when reporting entertainment and home-office expenses, as the IRS views these items as a source of potential abuse; ensure that you have the necessary documentation to legitimize these expenses. Avoid Red Flags Consecutive Business Losses: Third-Party Income Reporting Doesn’t Match: Claiming Large Deductions relative to Income: Accuracy is Important Errors such as an incorrect ID Number or Schedules that don’t add up could get you flagged for an audit. Prepare for an Audit If you do get audited, having your records in good condition can greatly help you. Always ensure that you keep all of your business paperwork organized and in good order. Keep track of your bank statements, cancelled checks, expense receipts, vehicle mileage logs, invoices, deposit slips, accounting reports and any notes related to your business. Keep in mind that even if an outside professional prepares your return, you are ultimately responsible for the information it contains.
