KEEP IRS AT BAY: AVOID COMPLACENCY AND AUDIT

“I haven’t ever been audited so I don’t have to worry about it.” Maybe yes. Maybe no. The IRS audits about four percent of self-employed business owners and recently they focused on auditing mom and pop, cash-based businesses such as bars, restaurants, mobile food vendors, construction workers, laundromats, and retail stores.

 

The chances of being audited go down dramatically to .05 if the business is a partnership or S Corporation. Incorporating solely to reduce the risk of an IRS audit is usually not good planning. Consider all favorable and unfavorable facts prior to incorporating.

“So why worry about it?” If you have poor or few records when the tax man cometh, the cost of reconstructing records, of lost time, and of legal and accounting fees will be staggering. Those in business know that it is less expensive to maintain good records than it is to create records from bits and pieces of records that are two or three years old.