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Are you putting yourself in the proximity of an audit?

The end of March brings the April shower of tax filings to the Internal Revenue Service. After submitting their tax forms, Texas businesses will have their fingers crossed that refunds will flower.

According to a recent study, companies located near IRS offices are more likely to be audited. A recent joint study by professors from the University of Texas at Austin, Texas A&M University, University of Kansas and Clemson University gives pause to companies neighboring IRS offices in major metropolitan areas.

While proximity is likely a coincidence, certain strategies do exist to minimize of bringing unwarranted attention from the IRS.

Round And Round Again?

Perfectly rounded numbers may be anything but. Rounding up and down shows the IRS that you may not be keeping accurate records. While time consuming and aesthetically non-pleasing, specific amounts can minimize the smoke where the IRS may see fire.

Business Or Hobby?

Businesses have their ups and downs. However, the IRS will take notice of so-called “bad years” for businesses. Successive shortfalls will raise suspicion that hobby-related expenses are being used, a misrepresentation that could spur an audit.

Are You Not Entertained?

Deals are made over a cocktail or during a golf game. Business entertainment expenses are integral to operations and legal to deduct. However, pricey meals and travel will cause alarms to go off in already neighboring IRS offices. Prudence should be the rule, not the exception in claiming solely business-related recreational costs.

Desk Or Changing Table?

Telecommuting and cloud computing is on the rise. Business owners who work from the comfort of their homes can claim deductions. However, a designated part of the home must be used exclusively for business, not a nursery where the baby sleeps or a room where you watch TV.

While no foolproof equations exist to calculate a business’ chances for an audit, certain steps can minimize your chances. However, it is safe to say that you probably don’t’ have to move away from your friendly neighborhood IRS office building.

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William T. Peckham
1104 Nueces Street, Suite 104
Austin, TX 78701
Phone: 512-487-7604
Fax: 512-478-1790
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