In 2012, the IRS sent out letters to small businesses that use credit cards to accept payment, asking them to verify all of their cash earnings. If the IRS believes that your credit card transactions make up too large of a percentage of your total revenue, they may ask you to re-examine your records. If that is so, they will send you a letter and you will have 30 days to send them in writing an explanation. If you don't do this, you may be audited. And if that happens, here are 4 tips to help you with your audit.
1. Keep meticulous records. Make sure you have everything written down, all transactions.
2. Log all of your appointments. Use a program that has a calendar.
3. Use accounting software for your cash payments. You can use a program like QuickBooks Online.
4. Enlist professional help. Sometimes you just need a little extra help.
I've been audited. It's not fun! :smileyvery-happy:
It was many years ago and they didn't get us too bad, but it was a good learning experience. As a result, here's another tip:
Despite your tax accountant telling you that you can deduct certain things, be sure to check his facts. My tax guy (at the time) was deducting everything but the kitchen sink. I kept saying, "Are you sure?" and he would arrogantly laugh it off. He would also assure me that he was there to represent me if anything went wrong. I've got a better idea; just play by the rules and you'll never lose sleep at night. Sure; you can get creative with deductions but make sure the IRS allows it or they may be paying you a visit one day. That's the bottom line.
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