Rethinking the audit process: Proactive planning services for your company in Rancho Cucamonga

“Audit” is arguably one of the most dreaded words in the English language. It is important to know that, just because you are being audited, does not mean you have done anything wrong. Also, many of the common “triggers” for an audit can be avoided by partnering with a firm like Whyte & Associates. We have been providing company auditing services, including representation, to clients in and around Rancho Cucamonga for more than 60 years.

So, why are you getting audited?  

It could just be the luck of the draw! The Internal Revenue Service notes that some returns are merely selected based on a formula or computer screening at random. Just as you might use data for business intelligence within your organization, the IRS uses information from randomly-selected tax returns to drive decision-making. They compare selected returns against the “norms” for similar randomly-selected returns. These findings are used to update the agency’s National Research Program.

Then again, your tax return may be flagged due to more than mere statistical formulas. There may be something within your return, or within the returns of business partners and other associates, which could trigger the need for the IRS to review or examine your individual or business accounts. The IRS may also request additional information related to your finances, to ensure that you/your business is correctly and completely satisfying the tax laws, and to verify that the tax reported on your return is accurate.

A few of the situations that might set off alarm bells in an IRS examiner’s mind include:

• You earn more than $200,000.
• You have lots of accounts, which potentially raises the risk of failing to report all income.
• You operate a home-based business.
• Similar to the above, you take a home office deduction (the IRS will scrutinize what you characterize as a “home office”).
• You frequently round up or round down; for instance, there are lots of references to “$100” or “$500” but not “99.97” or “502.22.” This can look curious to examiners.
• Your affinity for crypto or virtual currencies can be a liability, because these transactions are not subject to the same governmental control as tangible, “standard” currency.
• Several years of operating in the red may warrant a deeper look into your deductions and into the completeness of your reporting. Is some income missing?
• Typos and math errors, which can make you look careless.
• While we encourage you to take those deductions that you are eligible for, a large number of itemized deductions especially in relation to your income may raise suspicions of abuse.
• You take early withdrawals from retirement accounts that have tax-favored status.
• You operate a business that handles lots of cash; i.e., service providers whose workers make tips.
• You have more than $10K in foreign-held assets, or have filed a suspect Foreign Bank Account Report.

Many of the risks can be avoided or minimized by partnering with experienced tax preparers and auditors. In the event that you are still selected for an audit, our Enrolled Agents have attained the highest designation awarded by the IRS. They have unlimited rights to represent you on all types of tax matters and before all IRS offices. Do not live with the cloud of an audit hanging over your head. For a sunnier tax outlook, contact us today.

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