For people running businesses in the United States, the IRS audit scares them the most. A study showed that the participants were more afraid of audits than identity theft. Those who pay taxes with high incomes are more likely to get audited.
IRS audits scare people because they usually take place when there is some discrepancy in the financial statements. The process can take up a lot of time, which will mean you will not be able to focus on your business in the meantime. Furthermore, every state has different rules and regulations regarding taxes, finances, etc.
In Dallas, Texas, you will have specific laws that need to be followed by businesses. If you do not follow the rules and regulations, you can get yourself in legal trouble. There is also good news, which is that there are some practices that can enable a person to mitigate the risks of an audit.
You will also remain prepared for the audit beforehand. You can contact a CPA in North Dallas, Texas, to help you stay on track with your finances and any tax-related matters.
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How can you reduce the risk of an audit?
There are several ways that can help a person reduce the chances of an audit to take place; let us look at a few of them:
Consider twice if the deductions are going to be unprofitable for you:
There are two things that are distinguishable by a fine line. A business or enterprise that is not getting any profit at all and someone pursuing a hobby who does not aim to gain any profit from it and is doing it just for deriving pleasure or satisfaction from it.
If your enterprise has something to do with yachts, art, horse riding, plane leasing, etc., then it will fall under this category. If you are deducting expenses on these things, you are likely to get audited, so look into this.
Avoiding tax preparers who will not sign a return that they drafted:
Nowadays, tax authorities and the International Revenue System are becoming concerned about the matter of tax preparers trying to hide from the tax authorities. If someone is a paid tax return preparer, then they should not have any problem with signing any tax return.
They should also provide their social security number when they should be in the box. If you notice that your rad preparer is not doing so, then you can ask them why they are trying to hide these things from the IRS. This is important as it can create problems for you.
It would help if you kept “reportable transactions” and “listed transactions” in mind:
You should know that the IRS keeps “listed transactions” under improper techniques. Listed transactions are basically a subset of reportable transactions. When it comes to reportable transactions, the IRS is going to require some additional disclosures regarding the taxpayer’s return.
If you are someone who prepares their own return, it is recommended that you go for professional return preparation, especially if you are dealing with any of the listed issues.
Try to respond to notices promptly:
Every week, you are likely to receive notice from the IRS. You can also receive more than one notice at a time. There are many notices among them that may ask about the information that was also provided on the tax return.
You, as a taxpayer, are required not to overlook or ignore these types of messages and respond promptly. If you ignore them, you are likely to get yourself in trouble.
CPA can take care of an audit!
Certified Public Accountants have the required knowledge to deal with these things. They ensure that all the records within your business are accurate and maintained correctly so that you do not find yourself in such scenarios in the first place. Thus, hire a professional and make things easier in your business.