When you file your taxes, one of your worst fears may be an IRS audit. It is important to ensure you take the right steps and comply with the taxing laws to minimize your chances of an audit. Receiving a letter from the Internal Revenue Service is enough to make someone anxious. You may get visions of getting thrown into jail, your business shutting down, or paying hefty fines for significant taxing errors.
There are various reasons why the IRS may audit you, and most of them can be avoided when you work with a professional tax preparer. If you are telling the truth and the IRS still audits you, you need not worry. A professional for Tax Resolution for businesses in San Mateo, CA, can help you deal with the IRS efficiently unless you have used improper methods of cheating the system.
Reasons the IRS may audit you.
- Data entry errors.
Anytime you enter data, especially numerical ones, you risk entering data incorrectly and other mistakes. These errors usually occur because there is a lot of math involved, and unless you deal with numbers and math every day, you are bound to make mistakes. The IRS may send you an audit letter for an error as tiny as entering one wrong digit in your Social Security number.
The use of technology can eliminate these issues. Filing electronically and using tax software can eliminate the errors that occur while manually typing.
- Failing to report some income.
The easiest way to invite an IRS audit in your business in San Mateo, CA, is not reporting some part of your income, thus committing a crime. For example, if you are employed in a company and also work as a freelancer, you may choose to report your income from your employment only and keep the freelancing income hidden. However, this trick never works, as the IRS already knows the income listed on your 1099. Once they discover your omission, you will be in trouble.
- Claiming too many charitable donations.
If you have made some significant charitable donations, you may be able to conduct some deductions. Naturally, many people take advantage of this and report false donations to get deductions when in reality, they have spent that money somewhere else. Doing charity is a good thing. Do not tarnish it by lying and saying that the money you used to buy a car was actually a charitable donation for poor people.
You should always have proof of your donations. When you make the donation, get a receipt from the organization. If you do not have evidence, do not claim it.