When tax season comes around, both individuals and businesses worry about the possibility of an audit from the Internal Revenue Service. Even if you think you did everything correctly, everyone makes mistakes, which can result in harsh penalties. However, audits are extremely rare. Some reports estimate that only 1.1 percent of people who file end up with an audit.
There are several tips for avoiding an audit, such as only making realistic deductions. If you are truly worried about an audit, then there are several steps to lower the odds.
Whether you file for yourself as an independent or file for your business, it is highly recommended to conduct an audit on yourself before submitting the paperwork. There are a variety of techniques IRS employees utilize when determining whether a business should undergo an audit. Try to see if there is anything on the forms an IRS worker would take note of.
Be comfortable with any IRS employees who visit
In the event your business falls within the 1.1 percent that ends up with an audit, you can expect a worker from the IRS to pay your company a visit. There are some circumstances where you simply receive a letter, and you can mail off the proper correspondence to take care of the problem. When you have to go to your local IRS office to take care of the matter, you should have a couple weeks to prepare.
Do not fret
As long as you fill out your tax returns truthfully, you will have little to worry about. If it does happen, then you can expect to go over your forms with a tax professional. Most of the time, the person receiving the audit simply needs to pay a little more in taxes. While the word “audit” sounds scary, it is extremely rare, and you should fear it the same way you fear getting struck by lightning.