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Avoiding small business tax audits

| Dec 4, 2017 | audits

The last thing that a small business owner in Maryland wants is a tax audit. While the chances of being audited by the IRS are relatively small, this fact is cold comfort to an entrepreneur who is faced with an investigation. Fortunately, there are several things that business owners can do to prevent IRS scrutiny.

One of the most important ways a company can prevent audits is to update business processes and record keeping. New technologies make it easy to keep accurate records and share these records with professionals such as bookkeepers, accountants and tax attorneys. Maintaining and uploading spreadsheets, invoices and expense receipts to the cloud can prevent last-minute scrambling at tax time. This can also prevent missing documents that may make an audit more lengthy and difficult for the business.

Companies should also take steps to ensure that tax returns and payments are filed and made on time. Working with a tax professional may be helpful in ensuring compliance with local, state and federal obligations. If a business hires third-party contractors, the company should ensure that it has W9 forms for each contractor, demonstrating that the company had no obligation to submit payroll taxes for these contract or freelance workers.

Company owners who are concerned about taxes may benefit from speaking with an attorney experienced in tax law. The lawyer could review the client’s case and make recommendations regarding bookkeeping processes, determining whether a worker is an employee or freelancer and ensuring that the company is aware of tax law changes. In addition, the lawyer may be able to represent the company during a tax audit or other conflicts with tax authorities.