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10 tips to help you reduce small business audit risk

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in Compensation and Benefits,Human Resources,Small Business Tax,Small Business Tax Deduction Strategies

Company.com, an information and lead generation portal for small and midsize businesses, has provided a list of 10 tips for helping businesses avoid IRS tax audits.

Strategy: Take these suggestions to heart. If you follow them diligently, you can dramatically reduce exposure to an audit.

1. Make your business a business, not a hobby.

If you are in your third year of business and reporting a third year of losses, that’s going to raise a red flag with the IRS.

If you can show the IRS the evidence, they’ll understand that you’re a loss-making small business—for a while. If you’re in year four and still making a loss, expect to hear from the IRS about when you plan to start earning a profit.

2. Report your income accurately. If you are paid $3,250 for a service you provide, and you round that down to $3,000 when you report the income on your return, that’s a red flag, too. It tells the IRS that you’re not keeping accurate record...(register to read more)

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