Tips for Las Vegas business owners to avoid a tax audit
It’s a nightmare scenario for most Law Vegas small-business owners. A notice comes in the mail for a tax audit, causing a business owner to begin to panic. Although tax season is officially over for this year, taking precautions to avoid a tax audit is always smart business. During the past 10 years, the IRS has scrutinized corporations with less than $10 million in assets. In 2011, the IRS performed more small-business tax audits than in any other year over the past decade, examining 19,697 tax returns.
Individual audits are also increasing, with about 1.5 million returns audited in 2011. While these numbers are still less than audits of large corporations, it can still be intimidating to receive the notice for a tax audit in the mail. In general, it appears the IRS is stepping up its enforcement efforts, so it may be a good idea for small-business owners to be prepared for an audit.
There are two flags the IRS looks for prior to scheduling a small-business audit. One is failing to keep any business expenses separate from personal ones. Failing to do so could trigger an audit. The other is reporting net revenue instead of gross revenue. Either oversight could result in an IRS decision to take a closer look.
Some major tasks small-business owners in Las Vegas could do to prepare for a tax audit are keeping meticulous accounting records and taking pictures of a home office to prove to an auditor if it is claimed as a deduction. Also, ensuring tax deadlines are met is critical and could result in an audit for that reason alone. Sometimes a tax audit notice may be the result of a small mistake that can be quickly fixed. While receiving a notice is no one’s idea of good news, advance preparation can help business owners stay calm in the event of a tax audit.
Source: The Street, “How to Prevent an IRS Audit of Your Business,” Laurie Kulikowski, July 20, 2012