More Audits Coming in 2021
At the end of last year, the IRS announced its plans to ramp up small business audits by as much as 50% and by as early as February 2021. These plans come at a time when businesses’ books look even more complicated due to the pandemic and the numerous stimulus packages that have come with it. Kelly and I think it’s important to keep our readers and our clients informed of how this might affect them… So don’t panic! We’re going to walk you through it.
Increased small business audits could impact any number of businesses, but it’s safe to expect increased audit activity around startups, LLCs, S corporations, and sole proprietorships. These can include smaller retailers, online businesses, freelancers, and family-owned companies.
How can I avoid an Audit?
If you’re worried about audits, here are some tips to safeguard your business and give you a leg up on avoiding an audit:
- Keep Clean Records: Make sure you are accurately and honestly reporting all figures, such as income and deductions, and have the documentation to support it, which will reduce errors in your tax returns.
- Watch Deductions: While it’s tempting to deduct any and every expense remotely related to your business, it’s important not to go crazy. An unusual deduction will immediately raise a red flag; multiple will raise many. Don’t cut corners; consult your CPA, and they will help you.
- Make Estimated Tax Payments: If you think you will owe more than $500, try making quarterly tax payments. This will help reduce your risk of an audit.
- Switch to Cloud Accounting: At SDA, we use Cloud Accounting Software through QuickBooks Online. It’s easy to use and keeps all your records in one place. Switching to cloud-based accounting software will help you keep your financials organized, and it will help tremendously when it comes time to file your taxes. Find out more about our Cloud Accounting Services here.
The possibility of an audit can be scary, but it doesn’t have to be. If you have questions or concerns about being audited, consult an expert. Call SDA today. 770-392-1113.
-Stanley & Kelly