Keep Good Financial Records
One of the best ways to avoid a tax audit is to keep good financial records. Sloppy bookkeeping can lead to mistakes, and those mistakes can end up resulting in an audit. There are several software packages that help business owners keep their financial records organized, but it can often be just as cost effective and save time to hire a bookkeeper to help manage financial records.
Be 100% Honest
Another way to avoid a tax audit is to be 100% honest about reporting income, expenses, and deductions. It is easy to fudge a little on expenses or to comingle personal and business expenses, but the best policy is honesty. By being 100% honest in reporting, you will raise fewer red flags when you file your returns, thus helping you avoid a tax audit.
File on Time
The third way to avoid a tax audit is to make sure you always file all your paperwork on time. Paperwork is a hassle. It is time-consuming, and we would rather not do it. However, missing important deadlines is not only unprofessional, it can lead to trouble. Take note of all deadlines, put them in your calendar, and work hard to make sure that you don’t miss any of these deadlines when it comes to filing your paperwork.
Enduring a tax audit is never fun, but you can avoid being audited if you follow these tips. In the event that you do end up being audited, if you have followed the advice here, the process will be quick and easy because all of your financial records will be in order, you will have been 100% honest in your reporting, and all of your paperwork will be completed and filed on time.