If you're self-employed, filing your taxes can be a real nightmare. The IRS is notorious for auditing small business owners. Unfortunately, that label applies to most people who are self-employed. The last thing you want to deal with is an IRS audit. They'll want to dig into all your business records to make sure everything matches. If you haven't incorporated, your personal taxes and assets will be fair game too. If you're self-employed, the first thing you want to do is get yourself incorporated. The IRS is less likely to audit you if you've filed for incorporation. In addition to incorporating yourself, here are four other steps you can take to avoid being audited by the IRS.
Use a Calculator
When you're filling out your tax forms, a calculator is the most important tool you can have on hand. No matter how good you are at math, you'll want to use that calculator when filing your taxes. Math mistakes are a big red flag for the IRS. If you have a math error, even a small one, the IRS is going to go over your return with a fine-tooth comb. Each error they find brings you one step closer to a full-on audit.
Get it Right the First Time
When you file your taxes, make sure you get it right the first time. Include all the forms, all the documentation, and all the information you'll need for your return to get accepted the first time through. If you need to file an amendment, you should plan on being brought in for an audit at some time in the future. The best way to avoid an amendment-related audit is to wait until you have all the documentation you need before filing your return.
File Close to the Deadline
If you're expecting a refund, you probably want to file as quickly as possible. Unfortunately, when you're self-employed, that's a good way to get yourself lined up for an audit. The IRS usually has a list of potential audit targets long before the tax deadline comes along. The sooner you file, the greater chance you have of being picked from that last. However, if you wait until you're closing in on the deadline, the IRS will have already begun their annual audits.
Hire a Professional
If you're self-employed, and you want to avoid an audit, one of the best things you can do is hire a professional tax service, such as Jeffrey Beebe CPA, to take care of your taxes for you. They'll know exactly what to do to help you avoid an audit. Not only that, but if you do get audited, they'll be able to explain how your returns were computed.