Did you know...

That small businesses are 2.5 times more likely to be audited by the IRS than individuals? What can cause your business to be audited? How can you protect yourself as a small business owner?

It's true! Being a small business owner can raise more flags for the IRS than being Joe Schmoe, the taxpayer.

There are a couple different reasons why this could be an issue. First, just the fact that your business is brand new can spark an audit. The reason is because it is assumed that you (as the new business owner) do not know how to maintain proper financial statements. The way your business expenses are categorized is another reason for auditors to come around. Deductions should be carefully chosen based on your specific industry. Are all meals and gas fill ups truly business expenses? Another red flag is when businesses report losses for multiple years.  

There are many ways to protect yourself as a small business owner:

• Hire a qualified accountant - this will ensure that your business activity is properly reported on all financial statements
• Deduct expenses properly- make sure that your expenses are ordinary and necessary for your industry
• Don't report a loss every year - if you repeatedly report a loss year after year, the IRS will assume you are hiding something, or over-deducting business expenses - this is especially true for sole proprietors