If you are a small business owner, managing your business taxes eats up valuable time and energy that you know you could put to better use elsewhere.
Taxes can be a pain for all of us. But if you are a small business owner, managing your business taxes eats up valuable time and energy that you know you could put to better use elsewhere. Of course, if you think managing your tax filings is time-consuming, you sure won’t want to try your hand at an audit! In a timely article, Barbara Weltman of the Wall Street Journal last week compiled a list of 10 things to keep in mind when filing your business taxes to help avoid any undue IRS attention.
Most of her advice is common-sense and basic: report all of your income, check all of your math (and perhaps file electronically for that reason), provide complete information, etc. Her entire list and all of the information can be found in online but here are a few of the highlights.
Don’t file certain forms or schedules: certain optional forms and schedules can trigger an audit almost automatically, because of the extra scrutiny that is needed in such cases, and so if you can get around using these forms all the better.
Mind your personal entries: entries that are related to the personal side of your return (for Schedule C filers), these can ultimately lead a scrutiny of your entire return – including all of your business activities. .
Change your business status: IRS statistics show that you are 10 times as likely to be audited as a Schedule C filer than if you incorporate your business and elect S corporation status. While it costs a bit of money to incorporate, the move affords you greater personal liability protection and reduces your chances of being audited.
Watch your state return: even though the state level and the federal level of taxes are separate, there are still information-sharing agreements between the states and the IRS, so discrepancies on one form could pull an audit in both.
Finally, the best all-around advice is simply to always be prepared for an audit in the first place. The IRS randomly conducts audits so even the best filing can end up coming back to haunt you, but if you have invested the time and energy to prepare for the audit already then you don’t have to worry so much.
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