A buddy of mine owned a business back in the day that he was pretty proud of. It was a car repair shop, and he had started it from scratch. It was nothing fancy, just a local, honest shop that people really began to trust over time. He had developed quite a solid customer base over the few years he was open, and then out of nowhere, he shut it down. When I finally had the chance to talk to him about it, he reluctantly explained that he had screwed up his taxes and ignored it until it had gotten so out of hand he had no chance of recovering.
That’s the thing about getting in trouble with the IRS: the worst thing you could ever do is ignore the problem. The more time passes by, the more penalties will be applied, and before you know it, the amount that you initially owed will be only a small fraction of what they are billing you for. One of the best things you can do if you find yourself in tax trouble is to contact a business CPA. Of course, prevention is better than the cure, so if you can avoid getting in trouble in the first place, you’ll want to do that. Many certified public accountants specialize in corporate taxes, and can help you take certain steps to avoid an audit, or worse, penalties.
Here are some ways to make sure that you aren’t making yourself a prime target:
Don’t make small errors
Even certified public accountants will tell you that if you make a typo or write the wrong number down somewhere, that creates a red flag. This means that it’s not just important to get your math right during tax time, but throughout the whole year. If you’re not a numbers person, you might want to hire someone like CPA firm Burkett, Burkett & Burkett, who offers an accounting service to take care of it for you, so you have everything in order when the tax season rolls around. If you choose not to use a CPA to take care of your taxes, you can at least use an automated system that will check over your work for you and notify you if something seems “off”.
Don’t omit any income
This is just one reason why it’s important to keep good track of your documents and make sure that you have them all to refer to during tax season. So much as omitting a jury duty payment can make the IRS double check your return, and if they look at it a second time, they are more likely to find red flags. Sometimes individuals with salaried jobs and a freelance job on the side are tempted to avoid reporting their freelance income, but during an audit, that money would become a huge problem. If you run any kind of business, at least consult with a certified public accountant so you know how taxes will affect your business income.
Be careful with deductions
It’s easy to get willy-nilly with your deductions, especially if you know that you are entitled to them. However, neither a tax accountant nor a CPA would advise you to take advantage of a deduction unless you have the documents to back it up. The more deductions you claim, the more likely you are to get audited, so make sure that you’ve got your proof if you plan to wave that red flag high.
Do your research on CPA firms
Certified public accountants come highly recommended for their ability to assist with your taxes, and back you up if you get into trouble with the IRS. But, what happens when your accountant lets you down? If a CPA firm is suspected for playing with numbers on the returns they submit, all of their clients may be selected for audit. When you’re choosing an accounting office, do your research; talk to friends and get recommendations, and visit websites to make sure they look reputable and are updated frequently. It would be a shame to hire a bad egg for tax accountant, only to get audited and then not have someone to back you up.
When it comes to taxes, preparing for the worst is one of the best ways to avoid the worst. Staying honest and having the documents to prove it is key, but if you don’t trust yourself to do that, look into hiring someone to do it for you. That’s CPAs are around for.