A stressful time for both businesses and individuals, tax season can definitely bring challenges. The IRS has actually been cut back on employees and funding. This may thrill some people, who believe they will now be invulnerable to a tax audit. However, this really means that there will be more automation behind the scenes, so more careful attention to all tax form submissions is essential. One mistake could be the cause of a huge migraine for you down the road. Follow these tips to ensure you're in the clear!
A warning sign for the IRS if you are operating a business is if you are not receiving income. Because some people take advantage of tax benefits through setting up inauthentic companies, the IRS zeros in on this. You may receive an automated notice, however, do not necessarily stress out about it. If you are playing by the rules, you have nothing to fear. Simply be honest and upfront with the IRS, and send them back a spreadsheet or form that details your calculations. If it looks sound, they'll leave you alone.
Double check - even triple check - every little number and important piece of information. If something doesn't add up properly or there is lack of congruency, it won't look good. Remember, the more automation the IRS uses, the less you can rely on human inference from an IRS rep to "connect the dots" for you. Keep everything cut-and-dry and accurate. Go over all calculations.
Generally, the more deductions you claim, the more the IRS piques its interest. So make sure to have the proper documents to back up your deductions. This can be a rigorous but important process! Also keep in mind what qualifies as a legitimate deduction. Sandy Zinman, Chairman of the National Conference of CPA Practioners, says "Anything you have to spend money on to make money on is deductible." Does it actually support your business, or is it just for pleasure? Keep it real!
Hopefully, these tips will give you more confidence in filing your taxes. While simple, they are solid and won't fail you. The IRS isn't out to get you, so don't give them a reason to!
Matthew Koren is the President of Swiftly Paid, a credit card processing and payroll service provider located in Portland, OR. He runs his company, as well as partnering with a consulting practice taking businesses to market in China. You can contact him by filling out the Contact Us page, or by calling 866-402-1485, ext 750.