Tips To Avoid the Tax Audit for Self-Employed Individuals and Small Business Owners
Did you know that small business owners and self-employed individuals get audited at about 7% of the time? The number may not seem as heavy, but consider that we talk about millions of taxpayer here— you might want to get your tax returns straight. If you find yourself on the same boat with these taxpayers, know that taking your tax returns seriously is a big deal. Not to mention, can save you a whole lot of trouble too. With over 230 million tax returns each year, the IRS has all the expertise and the hawk’s eye for spotting erroneous tax returns. On top of that, they have all the means to put any business or individual under the scrutiny of audit. Of course, you do not want this. In case you’re wondering why small business owners and self-employed individuals are getting audited more often than the other taxpayers, it’s because the former group follows a Schedule C form. This form often comes with some red flags to those who review them. The good news though is that you can actually avoid being audited. For starters, here’s how:
- Adopt Honesty: Lying about your income and expenses can be very tempting, even more so that there is no one to counter-check right then and there. However, your (dis)honesty will definitely take its toll in the long haul.
- Review before Filing: What taxpayers fail to do at times is reviewing the figures they actually put into their tax returns. It could be difficult to spot your own errors, but giving it a second look can save you the trouble later on. Otherwise, ask a professional to do it.
- Go Easy on the Deductibles: Deductibles is one of the legit ways to reduce your taxes, however, this should be taken advantage of with honesty. An illegitimate deductible on your tax return is always a red flag that could lead to an audit.
- Electronic Filing: Taking advantage of the electronic filing reduces your risk of errors in the information your key in; not to mention, easier too.
These are just few of what you can do to avoid being audited. No matter what you do though, honesty and prudence remain to be the best advice you can get.