Business Guide 101: 5 Reasons to Choose Tax Expert for IRS Audit

3 Reasons to Not Represent Your Business in an IRS Audit on Your Own

Last Updated October 11, 2021

IRS audit is a business nightmare that despite all the best efforts can become true. However, you do not need to be scared of it. In most cases, an IRS audit may occur as a routine follow-up. Sometimes it may happen because something is fishy in the form that does not add up with the reports. In other words, the IRS double checks the numbers to ensure there are no discrepancies in return. So in case, IRS honors your firm for an audit, you need a tax expert for your small business. 

Tax preparers are IRS audit experts who can help a business come out of the clutches of the nightmare and flow in sync with its financial stature. 

As a business, overseeing your accounting and bookkeeping is vital so that during the tax season you do face trouble with the IRS. Nothing is sinister about the IRS audit, but with the help of tax experts, you can deal with the process in an easy way. 


IRS Audits


6 Possible Reasons for IRS Audit of Small Business

The purpose of tax audit is to eliminate the “tax gap” between what the IRS owes and what they actually receive. The IRS audits are random and sometimes selective in case of any suspicious activity. 

So, once the tax season comes around the corner, you have to look out for red flags that might land you as the hot candidate for the IRS audit. 


  1. Mathematical Errors 

One thing is simple about tax filings – Do not make mistakes. This applies to every firm that pays taxes every year. 

A basic math blunder where you write a “3” instead of an “8” even if it happens accidentally is going to raise alarm bells. It’s best to always revise the numbers, especially the zeros you want to add in the amount. 

Surely, mistakes can happen but proofreading the tax form before filing will hurt none. Otherwise, you will be hit with fines and penalties even if it was an unintentional mistake. 


  1. Missed to Report Income 

If you want to avoid the IRS audit, you better mention ALL of your income. 

For instance, if you made a profit in an assigned task, let’s say an article, you might be tempted to overlook the extra profit you made on a freelance basis. In this case, you have to submit the W-2 Form for the main job but also need to fill the Form 1099. 

Form 1099 covers the incomes from freelancing, stock dividends, and interest. So in case you do not list all of your said incomes, the IRS would still know about it. Why? As a freelancer, you wrote an article and gained cash from it. The publication will be listed on your form. They will send a copy. So, it’s only a matter of time before the IRS finds the missing income. 


  1. Charitable Donations 

What is the good amount of acceptable charitable donations? 

Contributing to charity means you are eligible for deductions too. A false charity donation is bound to raise the alarm for the IRS audit. When charitable donations are made, it’s vital to keep healthy records like proper documentation to credit as valid. 

So if you make a claim of $5000 in charitable deductions on your $20,000 salary, it will raise eyebrows. 


  1. Extra Losses on Schedule C 

Hello sole proprietor, this is for you. Being the master of your business is really cool right? You get to make all the decisions and so you are naturally inclined to handle the tax forms on your own instead of choosing the tax experts. 

We get it if you want to be an all-rounder. You might even be tempted to file some of the personal expenses as business expenses instead. But do keep the reported losses in mind – it will arouse serious suspicions. One might wonder how your company is staying afloat with a huge number of losses. 


  1. Business Expenses Deductions 

Mentioning too many losses or expenses is out of the norm. If you want to be eligible for the deductions then take care of two things; 

    • Purchases must be on a regular basis 
    • Relatable to your business 

You are a professional businessman, you will need stationery items in your office to ensure assets are available to complete the task. Let’s say, you might be interested in painting so if you buy utensils like paints and brushes it will be not related to your business and thus won’t be accountable for deductions. 

Painting for fun is not relatable to your business unless you are an artist who might benefit from it. So deducing unrelatable business expenses will ring the bell of caution for the IRS auditors. 


  1. Home Office Deductions 

Home office deductions are most commonly prone to fraud. Your home office can only qualify for the work related to your business. Occasionally using the sitting room to answer your emails and calls does not mean you have a home office. 

A section of your home needs to be fully dedicated to the business setup. Claiming for the home office deduction is defensible if it exists in reality. Therefore be honest about the expenses you choose to report. 


Reasons to Choose Tax Experts for Representing your Business for IRS Audit 


IRS Audit Expert


Now that you have a keen idea, about the reasons for the IRS audit, it is understandable that tax experts will be the guiding hand. 


  1. Keeping Right Records 

What good is a tax expert service? Documentation is handled professionally, bookkeeping is in check, all incomes, losses, deductions, and expenses are taken care of properly. 

Every business is required by law to maintain its records either in physical form or electronic form. 

A tax professional will be your helping hand by keeping the records safe and sound. Tax preparers use accounting software that helps to keep the books aligned. The work automation makes it possible to keep the balance of the records. 

So, in case you are missing an important document that is requested by the IRS auditors, and you are unable to produce it, it will raise questions. Tax experts will help you to avoid facing such situations. 


  1. Changes in Tax Code 

In case you are filing Form 1040-NR, you may not be as well-reversed in the taxes as a local resident would be. 

A non-resident alien businessman can benefit a lot due to tax professionals. Tax experts are aware of the various legislative actions that help a business stay afloat. They are aware of the latest updates in the tax code too. 

Tax experts are centered around US-related issues, tax filing concerns and have the expertise to handle the tax returns too.

For instance, My Count Solutions is focused to drive their clients towards financial stability with zero tax form errors. How? Each client’s tax situation is unique and demands a dedicated tax professional so as the outsourced help, an excellent tax preparer will be assigned to the respective client with the right expertise. 


  1. File State Return 

Every state in the US has its own rules and regulations in terms of residency status and tax liabilities. While some states are comparatively lenient with the tax limitations, some have specific time slots. 

In case you haven’t lived in the US for several years but are doing business, you will have to follow the rules of the current state your business is established in. The taxes will include the state, property ownership, and other important items. 

A tax professional is aware of the full tax-related details. They can offer on-hand guidance on how to better handle your file state return. 


  1. Avoid Costly Mistakes 

While using an accounting client portal seems like a good option, it is still prone to errors and omissions if not used correctly. 

Software often has limited benefits. Even to use one in a productive manner, the user must have the sense and adequate knowledge. A tax expert can better handle the IRS audit when handed over the right tools to maintain the records. 

Tax professionals can minimize the errors and balance the statements. They can ensure the correct information to be filed in tax forms.    


  1. Time Investment 

The average taxpayer can work through the IRS guidelines and fill their taxes as per instructions. However, it does require long hours of sitting on the desk to make sure you fill every box correctly. And despite the time investment if any errors occur in the form, how frivolous it will be?

Tax experts help you avoid such scenarios. It is THEIR JOB to help clients during the tax season. They fill out the forms, make sure all documents are in sync so that clients can avoid the unnecessary stress and headache of tax filing. You do not have to worry about the IRS audits when all information is legal. 


Bottom Line

It’s always a smart choice to choose tax preparation services to help you from the very beginning. My Count Solutions understands the importance of time and efforts invested in tax filing. As professional experts, My Count Solutions offers dedicated tax preparations services to its clients who want an expert on hand. 


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