Small business partnerships may want to spend extra time dotting I’s and crossing T’s this year when filing taxes.
IRS Small Business/Self-Employed division will be shifting its auditing focus from corporations to small-business partnerships, which have grown significantly in number over the last six years. From 2007 to 2011, the increase was more than 15%, according to the IRS.
To avoid getting into trouble with the IRS, here are three tips for small business owners:
No. 1: Keep business and personal accounts separate.
If you’re using a single account, it increases the likelihood that the IRS will then perform a second audit to examine your personal tax return as well.
No. 2: Clearly track income and expenses.
When you have separate accounts, it’s easy to keep track of your business income and expenses. It’s imperative to keep paperwork that shows why you’re writing checks or why you received income.
No. 3: Don’t deal in cash.
Small business owners should avoid business transactions paid in cash, because it raises a lot of questions in the eyes of the IRS.
If you are not sure that your income and expenses are being tracked and recorded properly, you should contact an accountant to review your method of recordkeeping.