Having transparency as a company creates an excellent image to the world, making many people will like your organization. Start with compliance with the tax laws and the IRS regulations in general. This makes you have a cordial relationship with the authorities. The accuracy of your reporting needs to be accurate always; hence have skillful accountants in your team.
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Disparities in the reporting usually attract confirmation efforts by the IRS. This aims to see whether the figures are accurate and if not, they may want to know where the problem is. At times, the state tax department can do the audits as well. Generally, there is no cause for alarm regarding an IRS audit, especially as a straightforward business. However, you need to be much concerned if the actions of inaccuracies occur over and over. What triggers an IRS audit, really?
Depositing or Spending Huge Chunks of Money
The law under the Bank Secrecy Act has set a limit within which businesses need to work with when doing the withdrawal or depositing. It states that a company cannot handle more than $10,000 without informing the IRS or the federal authorities. This is not to be hard on firms, but rather to try and curb illegal activities such as money laundering.
With this, it means that handling large amounts of money will trigger the need for an IRS audit with an effort of understanding where the money comes from. What if you transact $9,999? In this case, the reporting will save you from the auditing as you are within limits. However, if the next day you deposit $1, the financial institution will raise eyebrows. The IRS can interpret things as a calculated move to evade the limit, hence may take actions against you.
Making Calculation Mistakes
When the IRS does their analysis on your company, they are keen on the details. Therefore, you must ensure that your records are in razor shape when doing the tax filing. This is why taking time to prepare the documents is necessary. Avoid the last-minute rushes, which make it essential to do the filing fast to meet the deadline.
Seek assistance from tax audit experts. These professionals have a way to make an audit representation process clear and accurate at the same time. These tax professionals only need the power of the attorney so that they can do the IRS audit on your behalf. By allowing them into the audit process, you give them the capacity to deal with the IRS and the federal authorities on your behalf.
With their excellent understanding of the audit procedures and requirements, they will engage in logical and convincing talks with the authorities to reverse their initial decision on the tax matters. Besides, they present the missing documents which could be causing the problems. If there are errors in the tax reporting, they understand how best to rectify them. Therefore, you should worry about something inherently sinister happening during the auditing process.
Failure to Include All Income
Generally, you need to file taxes for every income you receive. The IRS typically knows about the money you get through the copies they get at different levels. For instance, every time you receive your salary, the employer will send a copy of your W-2 to the IRS. The main problem comes when including other incomes, such as when you engage in a freelance job.
The income from such sources goes to Form 1099. This caters to the non-wage finances you get. If you deal with some independent contractors and earn from them, form 1099-MISC will report the amount. It may be tempting to send only the main document (W-2 form) showing your primary source of money. Since the IRS department already has the form 1099, be sure of them finding you on the wrong side due to the partial income reporting.
Claiming Many Charitable Donations
You may be in a situation whereby you have recently engaged in several donations. If they are charitable, and you already have deductibles, you will want to be truthful with the financial information. The truth is, this will cause you problems, especially if you have nothing as evidence for the charitable donations. This may even result in an interpretation of a false donation from your side; therefore, it is advisable to avoid claiming it whenever you cannot validate everything.
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As a taxpayer, your accuracy when doing the filing of tax reports is critical. The disparities in the figures can sometimes raise eyebrows in the IRS, hence attract some auditing. Many aspects increase the chances of auditing, such as overlooking some payments and calculation mistakes. It is good to seek assistance from tax representation professionals as they know how the IRS conducts its services.