Small business are targets for IRS auditors. But when an auditor comes in to investigate, they aren’t only looking at your business, they are examining you and the way you carry yourself.
The IRS is likely to investigate the following issues:
- Does your lifestyle square with your report income?
- Does your business handle a lot of cash?
- Did you write off auto expenses for your only car?
- Did you claim personal entertainment, meal, or vacation cost as business expenses
- Did you “forget” to report all of your business sales or receipts?
- Did you write off personal living costs as business expenses?
- If you have employees, are you filing payroll tax returns and making tax payments?
- And last but not least, if you hire people you call “independent contractors,” are they really employees?
To read more into each issue, visit this link: http://www.nolo.com/legal-encyclopedia/irs-audit-auditors-small-business-30033.html