June 30, 2011
Preparing for an IRS Audit
While we sincerely hope that most of you are never audited by the IRS, there are steps you can take now that can help you in case you are ever audited. You should maintain accurate records as a first line of defense:
- Keep at least three years of tax returns and receipts.
- Keep cost basis for assets and property that you purchase as long as you own the property.
- File all of your bills and receipts for purchases for each year so you have a back up for all of your expenses.
- Correctly categorize all cash receipts for the year.
- If you loan money to your company, be sure you note and can verify that these funds are from your personal account and are not earnings.
- If you receive a bank loan, be sure to label the funds as a loan in your accounting system and be able to verify these are loan proceeds and not taxable income - the burden of proof is on you!
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