Avoid a Tax Audit

June 6, 2019 by OSYB Staff

Taxes have been filed and paid, yet, for a small number of businesses and or individual tax payers, a tax audit is in their future. Intuit Quickbooks shares that “An audit committee at the United States IRS office uses a computer program called the Discriminant Function System (DIF) that analyzes returns and red flags them on an auditor’s report if they are outside statistical norms. When a return receives a high DIF score, an agent reviews it to determine if it should undergo an audit — thus, triggering the audit process. “

No doubt a tax audit can be a stressful and an arduous process. Keep in mind that there are several types of audit:

• Compliance audit
• Construction audit
• Financial report audit
• Information Systems audit
• Investigative audit
• Operational audit
• Tax audit

Here are some things that you should consider avoiding as they could trigger a tax audit:

• Having a higher than average income
• Taking deductions that are disproportionate to your income
• Rounding up or averaging income
• Calculating home office deductions
• Claiming business losses year after year
• Filing a Schedule C
• Taking excessive deductions for business meals
• Claiming your vehicle as 100% business use

Keeping meticulous financial records is a good rule of thumb to follow whether or not you trigger an audit. Keep in mind that an audit can be started by random selection or because you become audited through a person or entity connected to you like an investor or business partner.

As always, when it comes to financial matters, make you sure you are in constant contact with your financial professionals.

***

For more information: 8 common tax audit triggers to avoid

Image Credit: Deposit Photos