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Anxious about an IRS audit? Beware of these mistakes

On Behalf of | Jun 26, 2024 | Tax Controversies |

An audit from the Internal Revenue Service (IRS) can be nerve-wracking even if you have done nothing wrong. While the probability of the IRS looking into your New York business may be small, it is not zero.

The IRS usually relies on random selections through statistical formulas when it comes to audits. However, certain practices can put your business on the IRS’ radar and make your business vulnerable to scrutiny. Knowing what these are may give you peace of mind and could even protect your business from an audit.

These practices could catch the IRS’ attention

If you want to keep the IRS from breathing down your neck, refraining from these actions can help:

  • Underreporting income: If you run a business and report less income than you earned, the IRS may view this as a red flag. Underreporting income also applies to miscellaneous earnings from freelancing, side jobs and even investments.
  • Unauthorized business deductions: When deducting business expenses, ask yourself if the IRS can consider these as normal and essential to your operations. If you own a restaurant, for example, the IRS could allow deductions on meats and vegetables. Meanwhile, deducting expenses for things like a karaoke machine, television set or artwork may raise some suspicions.
  • Too many even numbers: The IRS looks out for rounded or even numbers and too many zeroes in a tax return. This is because income is not usually that uniform. When filing your business’ taxes, you can round to the nearest dollar instead of to the nearest zero.

Filing taxes already can be a stressful endeavor for business owners. Facing tax issues can lead to even more stress. However, you can protect your business from too much scrutiny if you are proactive and precise when you file your taxes.