A business that is working in a certain country or state needs to follow the regulatory standards of the country, and through that, it can ensure that it is following all the guidelines stringently.
However, with a lack of awareness in the business profession a promoter might face the risk of audit and regulatory challenges when it faces the complex guidelines of the tax bodies. A business, therefore, needs a tax accountant attorney who can guide the management about the regulatory landscape of the business which allows the individual to make certain changes.
In this blog, we will examine some of the business mistakes that invite audit notices from the IRS and how they can be solved by remaining vigilant about operating procedures.
The Reasons Why the IRS Chooses to Audit a Business
Imagine a situation where a small business is not aware of the tax laws, and to protect the venture from financial problems, it has arranged and kept funds separately for the future of the business. However, being a sole proprietor, it might be considered as double dipping for a business and invites a tax audit.
Hence, it becomes essential to know the right business practices that will protect the venture from similar interruptions by the IRS and that can ensure the smooth running of the business. Here is the list of things that can bring your business under the radar of the IRS.
· Taking Deductions for Every Item
There are provisions for deduction in the tax system itself. However, taking multiple deductions can raise doubt in the tax department and can be questioned for scrutiny. One of the core fundamental reasons for deductions is to offset the major costs.
Apart from that, taking deductions for entertainment and meals and then taking home office deductions all indicate a different message and show that a business is taking advantage of the system and raising the cost in those areas to reduce taxes.
· Rounding Off Revenue and Profit Numbers
The next thing is rounding off the numbers, and through that, one can show that the business books are in the right order. However, the exact figures, like the ones that end with zeros and all whole numbers, show that the company is not reporting the actual figure.
It can further increase the tax burden, and an individual with a tax relief lawyer from Los Angeles or other states can get professional help by negotiating a fair deal with the IRS. Therefore, a good practice for a business is to start putting the actual figure without rounding it off for the sake of simplicity, as the real number looks authentic and will not increase suspicion for the IRS.
· Recurring Losses Over Multiple Years
An audit also scrutinizes when a business reports loss year after year and thus bars itself from paying any taxes. This suggests that the company is siphoning funds from the venture, and any link attached to the unauthorized account can create a legal case against the business.
Thus, keeping the business accounts separate and reporting the right numbers are important parts of maintaining the IRS’s regulatory compliance.
