3 Reasons Why Your Business Might Get Audited (And How To Avoid It)

Getting an audit notification is every business owner’s worst nightmare. Even if you think that you are on top of your tax affairs, you could be making some big mistakes that catch the attention of the taxman. In many cases, you will be audited and they will decide that everything is in order. However, if you are making mistakes or not paying as much tax as you should be, you will find yourself on the receiving end of some pretty big fines. 

 

 

The best way to avoid an audit is to understand the reasons why they happen in the first place. These are some of the most common reasons that your business will be audited. 

Deducting Too Many Items 

There are a lot of expenses that are tax deductible and if you want to reduce the amount of tax that you pay, it’s important that you claim everything that you are entitled to. However, it will cause some concern if you deduct a lot more items than other similar businesses and this is likely to lead to an audit. People often fall into the trap of trying to deduct as much as possible, so they claim for things that they are not tax deductible, like social events with clients or personal items that are not used for business purposes. It’s important that you spend time learning how the tax system works and what actually counts as tax deductible so you don’t accidentally claim for things that raise suspicion. It’s a mistake to think that you will get away with it because it will get noticed and the business will be audited. 

Filing An Amended Return

If you are running behind and you are going to miss the deadline, you might decide to file your return on time, even though it is incomplete, and then file an amended return later on. However, this is like telling the taxman that you haven’t got a clue what you’re doing and you’ve probably made some mistakes, so you are likely to get audited. If you are struggling to manage your tax affairs, hire an account like archimedia accounts and have them deal with it for you. They will make sure that everything is filed correctly and on time, so you don’t raise suspicion by filing an amended return later on. 

Unusual Growth 

If your business undergoes a significant amount of growth in the space of a year, this can raise questions. Your earnings and deductions might double due to a massive increase in sales or a big new contract that you have taken on, which is great for your business but it can look suspicious. It’s likely that you may be audited, so you should prepare for these questions. Gather your receipts and any other evidence so you can prove that your finances are in order because this will save you a lot of time later on. 

These are the most common reasons why your business might get audited but if you follow the advice in this article, you can avoid a lot of stress. 

 

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