Avoiding an Audit: Tips for Small Businesses

Published by John Holmes at September 3, 2021

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The word “audit” can easily strike fear into the hearts of small business owners. Not that most of the owners are trying to be dishonest when they file their taxes, but rather that they fear they missed something monumental. At Fricke & Associates, LLC, we are happy to guide you and diminish the chances of your business being audited. Audit services are one of our offerings because we understand the finest details of tax law and we are passionate about helping businesses navigate audits and avoid them. Follow these tips to help your company avoid an audit. We are standing by if you need help along the way!

·   File Accurately On Time—Despite what people expect, the IRS is not trying to trip you up and hoping you file your taxes in error. Through the IRS website, they try to provide resources and guidance to make the tax filing process clearer. Filing on time is important to avoid penalties. Also, when you file on time, you are demonstrating respect for the IRS and their practices. Review the IRS website prior to starting to prepare your taxes, so you have a clear understanding and can file them properly. If you want extra peace and reassurance, leave your tax filing to our professional staff. We will file your return correctly and thoroughly.

·   Do Not Abuse Deductions—There are some deductions for small businesses built into the tax code. If you qualify for them, you should take the deductions. Your business deserves the break. When you start trying to take deductions that are not applicable or are a bit of a stretch, this behavior could lead to an audit. The IRS does not like when people try to take advantage of the system and try to cheat on their returns. When you consult with us on your taxes, we can help you find the deductions which are truly suitable and applicable.

·   Know Margins & Loss—If your company claims the year as a loss for more than 2 out of your past 5 years of business, you can expect an audit will likely happen. Taking a loss repeatedly could cause the IRS to categorize your business as a hobby and you will be unable to take business deductions any longer. Margins are important to be aware of, so you can anticipate what tax bracket you are in, report your profits accurately, and know how much to expect to pay in taxes. Your margins should be representative of your year even though you will likely calculate them in quarters initially when determining your profits. If you are struggling to figure out your margins, we can offer support through a consultation.

·   Maintain Your Integrity—When you are doing your taxes, file them as honestly as possible. If you have a twinge of guilt about a deduction or feel like your reports are inaccurate, be truthful with yourself and fix the issue before you file. You want to maintain your track record for filing taxes on time and accurately. We can help you find ways to legally save money on your returns without compromising your integrity or triggering an audit.

Audits do not have to be a major worry when you are keeping clear records and filing your taxes appropriately. Whether you are interested in tax preparation support or audit services, our team of professionals at Fricke & Associates, LLC, will help put your mind at ease through our meticulous work and attentive care.

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