Nothing can scare more to anyone than a letter from IRS department regarding intimation for a strict scrutiny. It is true that mere intimation does not prove you a culprit, but a little carelessness or leaving any sign of ambiguity while answering the auditing team from Internal Revenue Service can trap you in a big scandal.
Taxation history proves that no one has been left out, no matter to whatever business, profession or industry they belong. There have been big stories about massive IRS scandals that have left people pay million dollar penalties or sometimes even imprisonment. Few years back a lady, who was an owner of a restaurant, was questioned ruthlessly by IRS people and was asked to give each and every receipt of her spending from last two years. It became next to impossible for her to represent every single document in front of auditors’ team and she was charged with huge penalties. This makes one thing clear, if you wish to stay out of any IRS controversy or scandal arising due to audit, you must really pull up your socks and start preparing for each financial year. Just tax consulting and planning throughout the year can only help you in saving your tax liability, but it does not guarantee a clean chit from IRS audit. You need to do much more than that. Only a professional expert with polished tax consulting and audit representation skills can help you with that.
Some of the crucial insights from experts in tax consulting & IRS audit representation give the following Do’s and Don’ts:
Beware if you are falling under Schedule C: Income from profession or business comes under Section C, This section is a hot topic amongst IRS audit and most of the penalties are collected through this section only. As sole proprietors generally tend to produce a tax gap in order to get away from tax liability and hence, fall under spotlight of IRS audit. So if you are falling under Schedule C, make sure you are filing a true statement to IRS.
Benefit of being a LLC: Generally, small business owners and sole proprietors generally report their income through schedule C. Many research works have shown that corporate audit risk counts to be just 10% as compared to income from Schedule C. Therefore, if you are business owner, it is beneficial to submit tax returns as a corporation.
Use technology: With advent of technology e-taxation has been a growing trend. Filing returns electronically is far easier and faster. By filing tax returns online you can reduce the chances of calculation errors. If you are finding difficult to file your taxes, you should probably consult a professional tax consultant to help you in the same.
Maintain consistency: Make sure that your source of income matches the income reported. Make sure that all the income reported should go in synch with your sources. A single discrepancy can invite you for IRS Audit.
Don’t claim for extreme deductions: It is true that deduction help you reduce your tax liability and forms a crucial part of tax saving strategy but make sure that everything looks authentic. Too much or overdo can drag you towards the spotlight. This can fetch IRS attention and can raise some questions.
Lastly, report all income and be honest, manipulations may invite IRS controversy. Stay at safer side and save your business from getting stuck into any scandal.
Uhlenbrock CPA is one of the leading CPA firm in San Antonio providing the best IRS audit representation in San Antonio. Profit Maximization of client is always our main motive if you want to get free quote then just Call @ (210) 701-1040