You feel like you are out of your mind when you’re busy at work and you got an email for tax audit. Or a stone-faced man with a dark suit and a big briefcase appears in the doorway. This is a terrible situation you exactly don’t have receipts for everything. Instead of facing California State Tax Audit solo, hire a private audit expert like IRS Audit Group California for your help, they can guide you step by step how to recover yourself from California State tax audit.
The reality is that companies in California get audited for any number of reasons, but it’s valid to wonder what makes some businesses more likely to be audited than others?
What can business owners do to prevent a California State Tax Audit?
The following list identifies key activities the IRS actively looks for and outlines some ways your business can prevent an examination:
#1: Keep Personal and Business Expenses Separate
Entrepreneurs attest that there’s a level of uncertainty when drawing the line between expenses, tax law where the IRS aggressively enforces that all business owners keep business and personal spending separate. Even if you’re startup it’s essential to split up business expenses and personal expenses.
#2: Provide Proper Documentation for Tax Credits
While providing documents for the tax credit you may need the help of a tax audit experts like IRS Audit Group California to claim tax credits, as claiming tax credits is a detailed process involving meticulous record keeping and complex calculations.
This is one more reason to have a certified tax professional (IRS Audit Group California) on your side. Even if you are 100% eligible for these credits, calculating the actual reduction to your tax liability can be tricky. The IRS is used to finding errors in calculations, making them likely to scrutinize each claim even more thoroughly.
#3: File Your Payroll Tax Returns:
The IRS is particularly harsh in enforcing fines for late payroll tax reporting.
You must file payroll tax returns for all compensation to employees. The amount reported as your total compensation expense for income tax returns should then match the amount reported for the payroll tax. Consultants like IRS Audit Group California help you in this regard.
#4: Follow the Filing Rules in Every Place You Do Business
If your business (property, payroll, or sales) has a presence in a state, you should look at the filing requirements for that state.
While 100% of your income is included on your federal return, if you have sales, locations, or employees in multiple states, apportionment of your income is required to determine your liability in each one.
#5: File forms 5471 or 5472 for foreign business
If your business has foreign activities or shareholders, you should be aware of the required forms based on your type of business (forms 5471 or 5472). Failing to file or filing late can result in a $10,000 penalty perform, per year! IRS Audit Group California provides service in this regard.
#6: Make Charitable Contributions in Cash Instead of Property
The IRS requires proof for most charitable donations, whether in the form of cash or property. While cash donations are easily documented by a check or receipt; non-cash items like furniture or equipment require documentation of fair market value and tax basis.
#7: Proofread, proofread, proofread
Be careful about wrong or missing social security numbers, math mistakes, errors in figuring credits or deductions and forms that are not signed or dated.
If your business does get audited. Remain calm and don’t forget to hire external tax audit professionals like IRS Audit Group California, as claiming your own tax audit by own is a kind of invite the tax audit to your home. The reality of being audited is that it happens to the best of us and it does not need to mean the end of your business.