Getting audited by the IRS is a frightening affair. It strikes the fear in the hearts of all small business owners, and can even cause some to hang up their hat entirely.
However, the IRS only takes the time to audit a small percentage of small business tax returns each year. So even if there is a chance that you may be audited, unless you did something knowingly against the rules or have glaring errors on your return, your odds of the IRS putting their nose in your business is sparingly low.
Here are some other facts about IRS audits that your small business needs to know from your trusted Florida tax and accounting service.
How long can an audit last?
Generally, the IRS only has three years to perform an audit. That may sound like a long time but, for some audits, particularly those with foreign accounts, the IRS can take six years. Think that’s a long time? According to experts some can last even longer:
For unfiled tax returns, criminal violations or fraud, the limits can be longer. In most cases the practical limit is six years, but for some information returns the IRS can audit forever.
Avoid an audit by seeking out and destroying red flags.
Do this by double-checking numbers and looking for income that wasn’t reported. Also, keep in mind the total dollar and percentage amounts you are able to deduct for business related expenses. The less the IRS has in errors on your account the less chance they’ll demand more information to support your tax filings.
Authenticate deductions that will draw attention.
The IRS has a pretty good idea as to what your type of business should be pulling in and your overall deductions. They have a benchmark set for all types of business. To avoid an audit, if you have had a particularly great year or if you’ve needed to deduct a ton of expenses, it helps markedly if you authenticate that money with proof. Receipts are your friend, use them to protect yourself from an audit.
If you have been audited and aren’t sure what to do, you need an expert’s help. A qualified tax and accounting service can help ease the pain of an audit, and help point you in the right direction.
For more information on how we can help you, please contact us with any questions that you may have.