In very many occasions, it becomes important for small business to utilize a professional tax audit company, CPA firm, or lawyer to oversee on their behalf the handling of potentially contested tax matters. As a matter of fact, a CPA firm or expert can come to the rescue should the IRS claim that your small firm has not paid all its due tax.
Only a tiny fraction of returns are audited by the IRS. Yet, when your small enterprise is one of the affected few, there are measures that you need to grasp and implement to improve the probability of a pleasant IRS small business audit outcome.
It’s possible for a small business to beat an IRS audit by implementing the tactics below:
Punch Holes into the “Hobby Loss” Theory
Theres’ the possibility that a specific business activity may be viewed as a hobby for tax purposes. The “hobby loss” concept holds that deductions are minimal when an activity is not engaged by a company for profit purposes. Should the IRS use the hobby loss to disallow company losses, you can contest that by showing that the contentious activity was a business profitability tactic. In such a scenario, you’d have to offer the IRS agent information demonstrating a pertinent marketing campaign and its ties to business profitability objectives. You may also argue and show that your business has been successful in the past, and provide evidence of reasons for the reported losses.
Include Missed Deductions
If there are expenses that you failed to include in your tax return, an IRS audit gives you a fresh opportunity to submit documentation for them. The importance of costs of home office proprietorship and business mileage cannot be overemphasized. In addition, there’s the possibility of paying more than required of you in case your tax deductions claims fail to mention charitable expenses and transportation associated with charity and medication.
Verify Your Deductions Using Creative Means
In certain cases, your small business may not produce documentation validating expenses features in your IRS deductions, but that’s not the end of the road. Third-party confirmation, such as Google maps or customer files, may be acceptable to the IRS as evidence of reported business mileage.
Consult a Tax Audit Firm
If just the thought of the pending IRS audit sends you cold shivers, it’s extremely logical and meaningful to get in touch with a tax audit professional, for example a tax lawyer, accountant, or CPA firm that can confront the IRS on your behalf. But before you can give any firm the legal authority to face the IRS on your behalf, you need to research their background and ascertain that they’ve competently handled many similar matters before.
For further reading/watching, please visit http://www.ehow.com/list_6646113_audit-checklist-small-business.html .