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Written by www.NFIB.com
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 | | entrepreneur online |
Protect Your Small Business Beyond Tax Season
Of the more than 100 million tax returns submitted to the IRS each year, fewer than 2 million are subject to closer examination. However, being a small business owner can put you at greater risk for a random audit. Audits can be costly and time consuming for a small business, but being better prepared can make the process less painful.
Macey Davis, tax counsel for the National Federation of Independent Business, offers five tips on protecting your small business from being audited even beyond tax season:
1. Keep Original Receipts: Keep tax records and corresponding documents organized and easily accessible for at least seven years. The IRS has up to three years to audit your return and six years to come after you if they think you have underestimated your income by at least 25 percent.
2. File Electronically: It is easier for the IRS to keep track of the return when it is filed electronically. Filing electronically means your return goes directly into the system without any eyes looking at it, which means there's no screening by lower level clerks. 3. Know When to File: It's a myth that getting an extension will increase your chances of being audited. It's more important to take the time to get it right. If you have a big refund coming to you, file early and get your money back. If you owe taxes avoid filing too early. Tax payments made prior to April 15 for the previous year's tax liability are interest-free loans to the IRS. 4. Avoid Handwriting Your Return: Math errors on returns that have been handwritten are common, so the IRS will look for those — and then they'll look for other errors. 5. Be Careful with Home Office Deductions: Though the home office deduction is another red flag for the IRS, business owners should not shy away from taking it if they are eligible. It's best to consult with a tax professional to help determine if your home office qualifies for the deduction. HBM Source: www.NFIB.com Previously published in the June 2007 issue of HOME BUSINESS® Magazine, an international publication for the growing and dynamic home-based market. Available on newsstands, in bookstores and chain stores, and via subscriptions ($15.00 for 1 year, six issues). Visit www.homebusinessmag.com |
