Running your own company can be very rewarding both personally and professionally. One important responsibility that you cannot escape is your tax obligations. Tax returns must be filed each year and must be completed accurately. Ideally, you want to avoid a tax audit, but they do happen. Here are some IRS red flags that may increase your chances of an audit.
The more successful you are, the more likely it is that you will fall on the radar of the IRS for an audit. While there is nothing wrong with trying to maximize the profits of your company, the reality is that it garners the attention of others, and that attention is not always necessarily welcome.
Throughout the course of your business activities, there may be certain expenses that are tax deductible. All businesses apply for deductions, but if your company appears to have higher-than-average deduction rates, this could be a red flag for the IRS.
Not meeting deadlines
The importance of meeting tax return deadlines cannot be stressed enough. If your records are accurate and on time every year, then there is less chance of having any issues with the IRS and you will avoid penalties. If you miss the deadline, even if it is just the result of an innocent mistake, the IRS may start asking questions.
Having legal guidance behind you as you file your tax returns will help reduce the chances of disputes. If you are caught up in a dispute, this will also help you to reach a suitable solution.