Let’s face it, most people don’t exactly look forward to tax season. In fact, research shows a sizable percentage of Americans find it downright stressful and anxiety-inducing. Whether you fall into this category or close to it: don’t stress – our team of tax filing professionals are here to help.
Preparing now and doing your research can help reduce tax season stress, especially when it comes to avoiding an IRS tax audit. In 2019, the IRS audited 771,095 tax returns. While there’s no surefire method to prevent an audit, there are some things you can do to reduce your chances of being audited. We’ve put together our top recommendations for you to consider when it comes to filing your 2020 taxes.
File on Time
First, it must be said to file your tax returns in general. One of the fastest ways to alert authorities is to not file at all. Filing on time is also important – even if you know you will owe and don’t have the means to cover the costs, or even if you know you will not owe anything at all.
Filing late, even if you file for an extension may increase your chances of an audit or result in penalties. Make sure you send in everything by the deadline.
Avoid Reporting a Business Loss
If you own a small business, avoid reporting a small net annual loss. The IRS is suspicious of any business reporting a loss, even if it is a slight loss. You must convey all of your income, but you aren’t required to register all of your expenses. Omit a few costs if your business will then report a small profit.
Don’t Use the Same Numbers Repetitively
Avoid using the same numbers each time you file a return, especially round numbers. Tax experts expect expenses to change and it could raise some eyebrows if you use the same numbers year after year.
Avoid Amending Returns Repeatedly
Indeed, you should amend your return if you discover a mistake after you have filed. However, you should avoid amending the same return multiple times. The IRS will likely scrutinize your amended returns more carefully for errors or omissions.
Make Sure All Forms Match Up
Employers and insurance companies must file a separate copy of all 1099 and W2 forms they send to employees and clients. Make sure everything you report on your returns matches the government-issued documents you receive. Even if the error was made innocently, it could still trigger an audit.
Utilize Schedule C Forms
If you are a small business owner, consistently report business expenses and income on a Schedule C form. Including business expenses on your personal return can be a red flag for tax professionals.
Respond If You Get An IRS Notice
Many taxpayers ignore notices from the IRS – don’t be one of them. If you don’t respond, the IRS could easily assume there are issues. Sometimes the letters are serious and sometimes they are simple and not a huge deal – either way, respond appropriately to its needs and promptly. If you have any concerns, you can simply ask an expert in the field.
Work With An Expert
Do you want more advice on avoiding an IRS tax audit? Based in Orlando, KDK Accountancy Corporation is an accounting firm dedicated to helping small businesses in multiple industries file correct tax returns. We specialize in providing accounting services for companies that operate in the construction, retail, broadcasting, medical and legal professions. Contact us today if you are ready to take control of your company’s finances.