INFORMATION & TIPS
"If your dreams do not scare you, they are not big enough."
Ellen Johnson Sirleaf
Information
Filing taxes can be complicated, but a simple mistake or a slight exaggeration could warrant an audit from the Internal Revenue Service.
Here’s how someone is chosen for an audit: An IRS software program may randomly select the taxpayer and compare the return to other similar returns to detect any anomalies, or the taxpayer in question may be linked to a family member or business partner who is being audited.
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The IRS can audit returns up to three years old. Inaccuracies could lead to penalty charges: 20% of the disallowed amount for filing an “erroneous claim for a refund or credit,” the IRS stated, or $5,000 if the tax return was deemed “frivolous,” where there isn’t enough information to assess correct or incorrect information.
In more serious cases, taxpayers could also be brought to trial and face criminal charges of tax evasion or fraud.
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"You must do the thing you think you can not do."
Eleanor Roosevelt
Tips
Keep business and personal finances separate.
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A common mistake of small business owners is to commingle business and personal funds. It’s important to have a separate bank and credit card account for your business. This will make things a lot easier when it comes to managing your books and getting things organized for tax time. If you are ever audited by the IRS you want to make sure that you can produce documents that support legitimate business expenses.
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