bookkeeping

Bookkeeping Tip: Here’s How to Avoid an IRS Audit

Worried about an IRS audit? Always keep in mind these two bookkeeping maxims:

1) File your income taxes
2) Report all the 1099 income.

When Steven R. Olmos’s case came to trial, he resided in Niles, Ohio. His case was simple: Olmos did not file a tax return for the year he operated his dental practice in La Mesa, Calif.

Of course, as you know, the failure to file tax returns often gets the IRS’s attention. In this case, it did, and this dentist suffered accordingly.

The IRS used the 1099s issued to Olmos by insurance companies and some of the checks he cashed to identify $43,886 in taxes due, a $10,072 penalty for failure to file, and a $1,754 penalty for failure to pay estimated taxes.

What made this dentist think the IRS would not notice his missing tax return? If he read any newspapers or even watched any television, he had to know that:

 

  • the 1099s report his income;
  • the IRS matches the 1099s to tax returns; and
  • missing 1099s gets the attention of the IRS audit process.


This was pretty much an open-and-shut case.

The court looked at the facts of this case and ruled for the IRS. 1- No surprise here.

You don’t want this story with your name in the future. It’s true. When you don’t file a tax return, you increase your chances of an IRS audit.

For that reason:

Let us take care of your bookkeeping needs, so you can concentrate on what you do best running your business!!! Let’s discuss more in a strategy session. Book Your Free Assessment Here.