by E.M.Robinson

Created on: April 05, 2008   Last Updated: October 26, 2009

Knowledge of the red flags that trigger IRS audits of business tax returns is a powerful tool. Don't lose sleep being worried that you will be audited by the IRS. Overall, the chances are low of being audited, but if you own your own business, those chances of being audited increase.

It is important that you have an awareness of the red flgs on your business tax return that may trigger and IRS audit.

Here are areas of concern that can draw IRS attention to your business tax return:

- Filing a complete and accurate tax return. Double check your calculations and be sure to use the right form.

- Having a return that is out of range of their averages for similar businesses or are out of line from your previous returns.

- Not disclosing Tax shelters

- Claiming Large deductions

- Having family members on your payroll

- Filling out the correct form using the accounting procedures appropriate for your firm.

- Claiming business related and accurate car mileage and having the records to back up your claim.

- Business expenses high when compared to business income? Tread carefully here.

There are these relevant factors as well:

1. The national Discriminate Information Function (DIF) system average. The DIF looks at which tax returns may be the best for the IRS to pursue in being able to collect penalties, more taxes, and interest.

2. Some IRS audits are simply at random.

So what are some other things you can do?

- Keep excellent records that are accessible whenever needed.
- Keep hard copies of records to back-up those on your computer.
- Maintain a working relationship with a business tax professional who can help you throughout the year.
- Even if you have accounting professionals working for you, make sure you understand financial documents that apply to your company.

- Contact a tax professional or your attorney if you are contacted by the IRS.

Knowing these areas of concern when you file your business tax return can help you make decisions that will not trigger an IRS audit. Knowledge is a powerful business tool.

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