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How to Avoid a Small Business Tax Audit

You can reduce your chances of dealing with the IRS by taking some additional steps before filing your tax return

Receiving a notice from the IRS for a tax audit can be nerve-wracking and strikes fear into the hearts of business owners everywhere. While the risk of being audited is somewhat low, no one likes to go through an audit. You can reduce your chances of dealing with the IRS by taking some additional steps before filing your tax return. Here are some tips to help you avoid an audit.

File Your Taxes on Time

Filing your taxes on time is essential to avoid penalties. Also, when you file on time, you show that you respect the IRS and its practices. It is a good idea to review the IRS website before preparing your taxes, so you have a solid understanding and can file them correctly. If you want extra peace and reassurance, reach out to a professional tax service and allow them to help you file your taxes efficiently and adequately.

Double-Check Your Files

Sometimes the difference between getting audited and not can be as simple as a typo. Simple mistakes raise red flags for the IRS. For example, if you get a 1099form, you should be sure that the numbers you put on your tax return match the information on the form. Forms like these are also sent to the IRS, and if they do not match perfectly, that can trigger the need for an in-depth look at your entire tax return. Mathematical errors or other mistakes will cause concern, too. Using tax software or professional tax services can help you avoid some of these more common mistakes.

Do Not Abuse Tax Deductions

There are many deductions out there specifically for small business owners. You should only take these deductions if you qualify for them. When you try to take deductions that are not applicable, this behavior could lead to an audit. To the IRS, this looks like you are trying to take advantage of the system. When you consult with Bowman & Company on your taxes, we can help you find suitable and applicable deductions.

Classify Employees Correctly

As a small business owner, you may hire independent contractors or a couple of employees to help run your business. However, if you have more independent contractors than employees, the IRS could view that as an issue. Be sure to classify workers correctly to help you avoid a tax audit. You should also review IRS guidelines about classifying workers, so you do not accidentally misclassify your staff. 

Contact Bowman & Company Today

Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim at decreasing your taxes and increasing your net worth through responsible, timely, and accurate recordkeeping. We offer our services to clients throughout the Washington, D.C. metropolitan area including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter,  Linkedin,  Facebook, and  Youtube.

This entry was posted on Friday, November 5th, 2021 at 9:34 am. Both comments and pings are currently closed.