Tips for Beating a Small Business IRS Tax Audit In very many occasions, it becomes important for small business to utilize a professional tax audit company, CPA firm, or lawyer to oversee on their behalf the handling of potentially contested tax matters. As a matter of fact, a CPA expert can come to the rescue should the IRS claim that your small firm has not paid all its due tax. Only a tiny fraction of returns are audited by the IRS. But in case your small business is one of the chosen few, there are steps you need to understand and take to increase the chances of a favorable IRS tax audit outcome. By adopting the measures explained here, a small business may survive an IRS audit:
What You Should Know About Experts This Year
Punch Holes into the “Hobby Loss” Theory
What You Should Know About Experts This Year
For purposes of taxation, a business endeavor may be classified as a hobby. According to the “hobby loss” rule, deductions are constrained in the event that a business engages in a not-for-profit activity. Should the IRS use the hobby loss to disallow company losses, you can contest that by showing that the contentious activity was a business profitability tactic. In such a scenario, you’d have to offer the IRS agent information demonstrating a pertinent marketing campaign and its ties to business profitability objectives. You may also argue and show that your business has been successful in the past, and provide evidence of reasons for the reported losses. Include Missed Deductions When there are outlays that you forgot to include in your tax returns, this IRS audit offers you another opportunity to include documentation for these. Do not take lightly expenses associated with the operation of a home office and business mileage. In addition, there’s the possibility of paying more than required of you in case your tax deductions claims fail to mention charitable expenses and transportation associated with charity and medication. Verify Your Deductions Using Creative Means There are cases where your small business may not have documentation that can validate expenses included in your IRS tax deductions, but that does not mean you’re doomed. Third-party confirmation, such as Google maps or customer files, may be acceptable to the IRS as evidence of reported business mileage. Consult a Tax Audit Firm If just the thought of the pending IRS audit sends you cold shivers, it’s extremely logical and meaningful to get in touch with a tax audit professional, for example a tax lawyer, accountant, or CPA firm that can confront the IRS on your behalf. But before you can give any firm the legal authority to face the IRS on your behalf, you need to research their background and ascertain that they’ve competently handled many similar matters before.