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. Actually, it helps to have a CPA expert on your side in case the IRS decides that your small business owes it some tax dollars.
The IRS inspects only a tiny percentage of tax returns. Yet, when your small enterprise is one of the affected few, there are measures that you need to grasp and implement to improve the probability of a pleasant IRS tax audit outcome.
It's possible for a small business to beat an IRS audit by implementing the tactics below:
Punch Holes into the "Hobby Loss" Theory
There's a chance that a certain business activity may be treated as a hobby for purposes of taxation. The "hobby loss" concept holds that deductions are minimal when an activity is not engaged by a company for profit purposes. 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 such circumstances, you'd need to provide the IRS agent with evidence featuring a related marketing plan plus its connection to company profitability objectives. 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.
Include Missed Deductions
If there are expenses that you failed to include in your tax return, an IRS audit gives you a fresh opportunity to submit documentation for them. Do not take lightly expenses associated with the operation of a home office and business mileage. You'll also end up paying more than the law requires of you if you fail to claim tax deductions for charitable contributions as well as mileage resulting from charity and medication.
Verify Your Deductions Using Creative Means
In some scenarios, your small enterprise may not supply documentation verifying the expenses outline in your IRS tax deductions. The IRS may accept third-party validation, like Google maps or customer's records as confirmation of business mileage.
Get Help from a Tax Audit Expert
If just the thought of the pending IRS audit sends you cold shivers, it's extremely logical and meaningful to get in touch with a tax audit professional, for example a tax lawyer, accountant, or New Jersey CPA firm that can confront the IRS on your behalf. However, before you can hand anyone the legal power to fight the IRS on your behalf, take your time to probe their experience and be sure that they've previously dealt with such cases with a good outcome.
You could also take a look http://www.ehow.com/info_12034126_tax-examination-vs-tax-audit.html if you like to know more.