Signs Your Business Has Increased Possibility of an IRS Audit
It is the objective of every taxpaying business to avoid an IRS audit by fulfilling all the necessary requirements by the IRS. However, there are certain factors that could make a business more susceptible to an IRS audit. If you want to avoid an audit then the following facts could be of assistance to your business:
The odds of your business being audited are greatly increased for the following reasons:
- Your kind of business generates large numbers of cash sales – examples of such businesses are restaurants, gas stations, motels and small stores.
- The industry you are in has a poor record of tax fulfillment – for example music businesses, charter companies, cab companies, bed and breakfast establishments, mortuaries and gas companies.
- The IRS audited one of your business associates especially if they paid you a lot of cash.
- You are a cash basis filer but request expenses for bad debt.
- Your facts and figures don’t add up – for example wages per income tax return and wages per payroll tax report.
You also have a greater risk of being audited by the IRS if your business is:
- An individual filing a Schedule F – 6 %
- A partnership – 4 %
- An individual filing a Schedule C – 1.17 %
- A C Corporation – 1 %
- An S Corporation – 1 %