The Peck Group, LC - Tax Law
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Situations that could trigger an audit for your business

| Sep 23, 2020 | Audits |

Even when people know they have done nothing wrong on their taxes, they usually want to do everything they can to avoid an audit by the Internal Revenue Service. Georgia business owners may be able to take some precautions to reduce the likelihood that they will be audited.

Keeping good records

You may have rounded up your income on your personal taxes, but doing this on business taxes can give the IRS the impression that you have not been as accurate as you should be on other parts of the return. The IRS may also want to take another look at what appears to be high business meal deductions. Be sure to record all relevant information, including who was present and what was discussed. When traveling, you should get receipts for expenses above $75.

Explaining losses

Some audit triggers are not necessarily within your control. For example, the IRS may audit you if it appears that you have had excessive business losses, but the truth is you may simply experience several bad years in a row. Taking excessive business deductions relative to profit could also lead to an audit, but this could be the legitimate situation if the business is a new one. The solution for these situations is simply to document as much as possible.

Home and automobile

You need to be careful with deductions for your home office and vehicle as well. Home office requirements remain strict, and the area can only be used for work-related activities. With both types of deductions, you will need to decide between two methods. Filing a Schedule C can also lead to an audit. One way around this is to make the business a separate entity. Overall, you should take deductions but have ample documentation.

Facing audits or other tax issues can be stressful, and you may want to contact an attorney to work with you in resolving these issues. This could include making a payment plan with the IRS, negotiating a settlement or dealing with several years of unfiled returns.

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