Avoid These Mistakes That Can Put You On Irs' Radar

By Author: David Brown
Total Articles: 22
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Tax compliance is a must for every company, irrespective of the operation scale or industry. A company hires accounting and tax services to abide by the legal rules and have clear insights into the financial status. The Internal Revenue Service (IRS) can knock on your door whenever they find something illegal or abnormal. You can face severe charges, even jail time, if they see you guilty of tax theft or other wrongs. Therefore, businesses must ensure neat and up-to-date records. 

Transparent files provide firms with evidence in case you get audited. Auditing may lead to one of the three outcomes mentioned below:

Auditors can find everything clear and per the regulations.

They can find something wrong and charge you penalties or more taxes to change. In severe cases, it can be jail time. 

While IRS proposes some changes, you disagree and appeal against it or enter mediation with IRS. 

The following points can trigger the IRS audit at your place. They will let you know what you are doing wrong and the proof needed to avoid frustration.

Reporting incorrect taxable income: ...
...

The primary mistake that can bring IRS auditors to your place is filing incorrect taxes. Both you and IRS possess the 1099 and W-2 forms for full-time employees and self-employed individuals. It enables detecting errors quickly. If your calculations are wrong, or you try to hide or mislead, you will face penalties. 
The W-2 and 1099 forms you file are the proofs accounting and tax services need to evaluate and correct any deviations. If it is a minor error, IRS will correct it themselves. However, fudging amounts is not okay and can land you into trouble, whether you are a company or a freelancer. 
Significant donations but low income:
If a business donates more than its revenue, it will lead to the IRS raising eyebrows. The IRS will be okay if your income reduces or you lose your business after donating money. However, if you use creative ideas to pay less money to the government, the IRS will not leave you alone. 

Avoiding this mistake requires appraising your donations. File form 8283 for donations rising above $5000 and keep the charity receipts as evidence. Always follow the IRS tips to ensure you are on the right track. 
Client entertainment expense deduction:

The IRS imposes strict regulations on client expenses claimed as deductions. Therefore, the accounting and tax services provider at your facility must educate you about the rules. You must spend accordingly and keep the receipts. 

It will be okay if you deduct 50% of a reasonably priced meal. The meal should entertain potential clients to become your long-term customers. However, if you try to deduct a lavish dinner as a client or travel expense, it will trigger the IRS. IRS has published the list of costs not allowed as deductions. 

Online accounting and bookkeeping services must keep receipts, date, time, expense description, business purpose, and relationship for any expense claim deduction. 

Claiming car expenses as deductions: 

If a business uses a car for business purposes, they can claim it as a deduction. However, it is strictly negatory to claim deductions if they utilize it to drive the kid to school, buy groceries, or other personal consumption. 

You need to keep a record of specific entries related to:

Car mileage

Calendar entries with beginning and ending dates

The business purpose for which you used the car

Read More: https://www.whizconsulting.net/us/real-estate-accounting-services/

We at Whiz Consulting always strive to provide what’s best for our clients. From accounting & bookkeeping services to payroll and taxation, we offer everything a business owner might need to run his business successfully. Our team of expert outsourcing accountants and bookkeepers help you handle your finances without any hassle.