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Craig Lundquist, MBA, ChFC®, CRPC®
VP of Wealth Management
651-773-2757
Kristin Becker
Senior Administrative Assistant
651-773-2821
Ideal Wealth Advisors
Located at Ideal Credit Union
8499 Tamarack Road
Woodbury, MN 55125
CRPC conferred by College for Financial Planning
January/February 2023
Preventing and Surviving a Tax Audit
Recognizing the most common audit triggers may help you avoid them. But, if your business is selected for an audit, having all your information organized, with help from your tax advisor, can get you through it.
Red Flags
The following are frequently triggers:- Not reporting all your income, especially if you receive cash payments.
- Failing to comply with employment taxes. You’re responsible for paying your share of FICA and Medicare taxes on your employees’ wages, in addition to withholding the employee’s portion of these taxes.
- Mixing business and personal expense deductions.
- Claiming losses or not showing a profit year after year. Failing to ever report a profit means the IRS may question whether you really have a business. Without profit, your business may be classified as a hobby.
Survival Gear
Organization is the key to surviving an audit. It starts with keeping accurate and complete records.- Business expenses must be common in your industry and necessary to run your business. Examples include office supplies, computer equipment, printer paper and similar items.
- Track cash flow, income and expenses.Consider using apps to upload receipts, keep track of mileage, and generate reports.
- Make sure you have supporting documentation, including cash register tapes, deposit information for cash and credit sales, invoices, receipts, canceled checks, proof of electronic fund transfers (EFTs), and account statements.
- Open a checking account and credit card strictly for your business.
Be prepared: During an audit, the IRS will want to see bank statements, a balance sheet, income statement, tax returns, loan and lease agreements, and proofs of purchase for equipment and assets. Your tax advisor can help you assemble the necessary documentation.
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Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Ideal Credit Union and Ideal Wealth Advisors are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Ideal Wealth Advisors, and may also be employees of Ideal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of Ideal Credit Union or Ideal Wealth Advisors. Securities and insurance offered through LPL or its affiliates are:
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