5 Takeaways That I Learned About Taxes
In very many occasions, it becomes important for small business to utilize a professional tax audit company, CPA firm, or lawyer to oversee on their behalf the handling of potentially contested tax matters. As a matter of fact, a CPA expert can come to the rescue should the IRS claim that your small firm has not paid all its due tax.
The IRS inspects only a tiny percentage of tax returns. But in case your small business is one of the chosen few, there are steps you need to understand and take to increase the chances of a favorable IRS tax audit outcome.
By adopting the measures explained here, a small business may survive an IRS audit:
The Essential Laws of Resources Explained
Punch Holes into the “Hobby Loss” Theory
Getting Creative With Services Advice
There’s a chance that a certain business activity may be treated as a hobby for purposes of taxation. As per the “hobby loss” rule, deductions are reduced in scenarios where an enterprise engages in a not-for-profit activity. If you need to challenge the disallowing of business losses based on the hobby loss rule, it is vital to demonstrate that the activity in question was a business profitability strategy. In that case, you’d have to give the IRS agent documentation showing a relevant marketing plan and its link to business profitability goals. It may also help to argue and prove that your enterprise has had prior success, and give evidence of the forces behind the recorded business losses.
Take Advantage of Missed Deductions
When there are outlays that you forgot to include in your tax returns, this IRS audit offers you another opportunity to include documentation for these. The importance of costs of home office proprietorship and business mileage cannot be overemphasized. Ultimately, you could also pay more than required by law when you don’t include in your tax deductions claims charitable outlay and mileage linked to charity and treatment.
Use Innovative Ways to Validate Your Deductions
There are cases where your small business may not have documentation that can validate expenses included in your IRS tax deductions, but that does not mean you’re doomed. Third-party confirmation, such as Google maps or customer files, may be acceptable to the IRS as evidence of reported business mileage.
Involve a Tax Audit Professional
If the mere mention of the oncoming IRS audit gives you tremors, it’s very reasonable and helpful to consult a tax audit expert, such as a tax attorney, accountant, or CPA firm that can deal with the IRS on your behalf. But before you can give any firm the legal authority to face the IRS on your behalf, you need to research their background and ascertain that they’ve competently handled many similar matters before.