If you do not pay all of your taxes by the tax-filing deadline, it leads to a penalty based on the amount that you still owe. This penalty will have to be paid at the conclusion of the audit when you pay the extra amount of taxes that you owe. Personal Finance Taxes. By Luke Arthur. Asking for Receipts. Additionally, make sure you understand the IRS receipt requirements so you can keep detailed records. Be sure to write down notes for all of your receipts so you can look back and remember exactly what the money was spent on.
This is particularly important for business-related expenses since treating a major client to a day at the golf course might not come across as a necessary expense on a printed receipt. The digital revolution has made keeping track of your receipts easier than ever — since , the IRS has accepted digital receipts. In addition to scanning paper receipts, put any digital receipts that may have been sent to your email or phone in this folder as well.
If you want help resolving an IRS audit when you have no receipts, there are plenty of qualified professionals that can manage your case. Audit representation can come from an attorney, Certified Public Accountants, or an enrolled agent. This individual will then stand in on your behalf during an audit to use their professional knowledge of the IRS to help you resolve the audit. Likewise, you could be audited if you show a huge increase from year to year.
Make sure that your expenses make sense in proportion to your business income. Keep your receipts and indicate the business purpose each expense is for. This is another area some people take advantage of, so the IRS tends to look carefully. Except for the costs of commuting, small business owners are entitled to claim business-related auto expenses on their taxes. But as with travel and entertainment, keep proper records such as mileage logs and calendar entries that include the business purpose, as taking this deduction may increase your chance of being audited.
Second, always respond to IRS requests in a timely manner, and always be cooperative and polite. The agency has an information-packed web page that can help you prepare. Many times, resolving the situation will be as easy as providing documentation to back up the figures on your return. Often, these audits will take place entirely by mail, and even if you owe additional money, there may not be any penalties involved.
Reconstructing records for the IRS Most importantly, get to work immediately to reconstruct the items. Tips to reconstruct your records: Review bank statements and credit card statements. They are usually a good list of what you paid. Vendors and suppliers may have duplicate records. Reach out to them if you need a copy. Appointment books can provide back-up information about travel, number of clients and frequency of service.
Cell phone records can help establish dates of service or assist in reconstructing expenses. You may be able to reconstruct a reasonable mileage argument with online map tools.
Consider periods of no travel. A tax pro can help Filing taxes is difficult. Make an appointment Or call What Does It Mean to be Audited? How Long Does It Take?
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