Owning a small business often requires an owner to be well-versed in multiple areas. One of the most important of these is accounting. Keeping up with an enterprise’s financial operations and records can be complicated. Further, even when a small business manages its financial and tax records properly, it may still end up being subject to an audit. Although the idea of an audit can be intimidating, there are steps you can take to get ready for the process. Here is more on preparing for a Florida small business audit.
Use Solid Accounting Practices
Using solid accounting methods can help your small business avoid making mistakes that could later be problematic. One way to be prepared for an IRS audit is by having an established history of using reliable accounting practices.
Keep Meticulous Records
Once you have identified the best accounting method for your enterprise, keep meticulous records of all of your financial activities. You want to be able to provide the auditor with the necessary information to evaluate your business. When you have complete, well-organized records, you can supply the required data and demonstrate that your operation keeps accurate accounting records.
Understand Independent Contractors v. Employees
One area where a small business can run into trouble is by treating workers who should be classified as employees as independent contractors. Some employers make the mistake of thinking that referring to someone as an independent contractor makes them an independent contractor.
The IRS will look at numerous factors to determine whether a worker is an employee rather than an independent contractor. When an employer misclassifies an employee, they can fail to pay employment taxes on that individual. When a business appears to have employees who have been misclassified, the IRS will usually conduct an audit. If you have employees and independent contractors, knowing what to expect and what the IRS is looking for can help you prepare for an audit and defend your practices during the process.
Be Aware of Common Audit Triggers
There are some issues that are more commonly associated with triggering an audit. One of which, as discussed above, is misclassifying employees. In addition, businesses that report net losses year after year may also be more prone to being scheduled for an audit. Large amounts of cash transactions can also be an audit trigger.
The more you know about what may trigger an audit, the better. One of the best ways to review your business’s potential to trigger an IRS audit is by working with an experienced Florida small business attorney. Your Florida small business lawyer can help you review your business practices and identify ways to minimize the risk of being audited.
Check Your Math and be Honest
If your business has been scheduled for an IRS audit, it may be because you have made an error. Before the audit, review your returns and check your math. Knowing if you made a mistake beforehand can help you determine your options. If you do discover you have made an error, you will have time to contact an experienced Florida business attorney to review your mistake and develop a plan for addressing the issue.
Contact an Experienced Florida Business Lawyer
Attorney Richard Sierra at the Florida Small Business Legal Center assists clients like you with commercial leasing, business, and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.