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Operating a small business of your own can be both fulfilling and frightening all at the same time. One the one hand, you have the opportunity to take control of your career and work for yourself. On the other hand, you boost your likelihood of becoming the target of an Internal Revenue Service (IRS) audit, according to the experts at TaxAudit, which has received a number of positive audit defense reviews. Here are a couple of things to avoid doing if you want to lower your chances of having the IRS come knocking at your door.
First, based on tax audit reviews by today’s leading tax experts, it’s critical that you report all of your income on your taxes each year. If you’re like many business owners, you might receive a great deal of revenue in the form of cash. In this situation, you may be tempted to avoid reporting your cash payments, especially for relatively small jobs. However, if the IRS suspects that you are holding back some income in your reporting, this could easily trigger an unwanted audit.
Second, avoid claiming financial losses everyyear, as this is another common IRS audit trigger. Although your expenses could certainly outpace your earnings for multiple years in a row, the IRS in this situation may begin to wonder why you’re in business in the first place. If you are not motivated to generate profits, then in the IRS’s book, you don’t actually have a business: You have a hobby. That means you can no longer take advantage of the deductions that business owners are allowed to claim when they file their taxes, and as a result, you could face a hefty tax bill going forward.
With some due diligence and expert guidance, you can avoid getting into trouble with the IRS or effectively address any audit-related issue you are currently facing with the IRS this year.