Operating a small business in the High Desert areas of Apple Valley, Victorville, Hesperia, and Barstow comes with unique challenges and opportunities. One concern that often looms over business owners is the possibility of an IRS audit. Understanding the factors that may increase your audit risk can help you take proactive steps to minimize it.
Common Audit Triggers for Small Businesses
While the IRS doesn't reveal its exact audit selection process, certain factors are known to increase the likelihood of a business audit:
- High Income Levels: Businesses reporting significantly higher income than industry norms may attract IRS attention. Ensure your income is accurately reported and supported by thorough documentation.
- Excessive Deductions: Claiming deductions that seem disproportionately high compared to your income can raise red flags. Always document deductions and consult a local tax preparer to ensure compliance.
- Cash-Intensive Businesses: Businesses that primarily deal in cash are more likely to be audited due to the potential for underreporting income.
- Home Office Deductions: While legitimate home office deductions are permissible, they must meet specific IRS criteria. Consulting a tax planner can provide clarity.
- Consistent Losses: Reporting losses over several years might prompt the IRS to question the viability of your business.
How to Reduce Your Audit Risk
To mitigate audit risks, consider the following strategies:
- Accurate Record-Keeping: Maintain detailed and accurate records of all transactions. Employing professional bookkeeping services can help ensure your records meet IRS standards.
- Professional Tax Preparation: Hiring a qualified local tax preparer familiar with regional business practices ensures your returns are prepared correctly.
- Consistent Reporting: Ensure your business financials are consistent year over year unless there's a valid reason for significant changes.
- Understand IRS Notices: If you receive an IRS notice, respond promptly. Engaging an IRS negotiator can help navigate complex issues.
Call to Action
If you're concerned about audit risks or need help with tax preparation, contact our experienced team at TaxHelpGuy by calling (760) 249-7680. We provide expert advice and services tailored to small businesses in the High Desert.
