Here are 3 ways you may get the IRS sniffing around.
No one likes the IRS questioning their small business, but we all know it happens. While there are many reasons you could get audited, usually the “luck of the draw”, there are a few ways you could actually bring it on yourself.
Below are three ways you may get on the IRS radar:
Business Car
This may be one of the grayest areas for small business owners. Of course, being able to have a car for your business may be necessary, depending on what you do, but proceed with caution.
Make sure that you have a personal car too. If you only have one car and you are claiming that car as a business car, that can put you on the IRS radar. Do you own a hair salon? You probably do not need a business car.
Do your research before you make this decision. Of course, a professional small business accountant will be able to steer you in the right direction.
Too many deductions
Be aware of how many business trips you are taking, how many meals you are expensing, and everything else you are counting as a “business expense”. These are pretty easy to keep track of and file away for tax time. Make it easy and get a receipt scanner, be sure to include notes of who was in attendance and what you discussed.
Having too many business dinners may get the IRS showing up, but a good record keeping system will back you up.
Accepting Cash Payments
We know the old saying, “cash is king,” but it could also mean tipping off the IRS. If you are a heavy cash business it can be very easy to hide income, or simply forget to claim it. While receiving cash is a great way to ensure you are paid, make sure you are giving receipts and finding time to deposit it into your bank account.
Similar to tax deductions, keeping accurate records of sales and services rendered will be your friend if the IRS comes knocking on your door.
Getting audited is a fear most business owners have. If you have a trusted concord small business accountant on your team, you can put your mind at ease.
Wondering what to do if you get audited? Check back for our next post!